Enel S.p.A. Annual Report 2019

Plain-text annual report

9 1 0 2 t r o p e R l a u n n A d e t a d i l o s n o C OPEN POWER FOR A BRIGHTER FUTURE. WE EMPOWER SUSTAINABLE PROGRESS. CONSOLIDATED ANNUAL REPORT 2019 CONSOLIDATED ANNUAL REPORT 2019 Enel is Open Power O p e n Po w e r P u r p o s e O p e n Po w e r f o r a b r i g h t e r f u t u r e . We e m p o w e r s u s t a i n a b l e p r o g r e s s . P V CPPo s i t i o n i n g M V i s i o n O p e n Po w e r t o t a c k l e s o m e o f t h e w o r l d ’s b i g g e s t c h a l l e n g e s . Va l u e s Tr u s t P r o a c t i v i t y R e s p o n s i b i I n n o v a t i o n i t y l V P r i n c i p l e s o f c o n d u c t l y a c t i v i t i e s a n d t a k e • M a k e d e c i s i o n s i n d a i i t y f o r t h e m . i n g t o c o l l l l a b o r a t e l • F o l r e s p o n s i b i • S h a r e i n f o r m a t i o n , b e i n g w i a n d o p e n t o t h e c o n t r i b u t i o n o f o t h e r s . l o w t h r o u g h w i t h c o m m i t m e n t s , p u r s u i n g a c t i v i t i e s w i t h d e t e r m i n a t i o n a n d p a s s i o n . • C h a n g e p r i o r i t i e s r a p i d l y i f t h e s i t u a t i o n e v o l v e s . • G e t r e s u l t s b y a i m i n g f o r e x c e l • A d o p t a n d p r o m o t e s a f e b e h a v i o r a n d m o v e p r o - a c t i v e l y t o i m p r o v e c o n d i t i o n s f o r h e a l t h , l e n c e . l - b e i n g . l , r e c o g n i z i n g a n d l i t y e t c . ) . s a f e t y a n d w e l a g e , d i s a b i i t i e s , p e r s o n a l • W o r k f o r t h e i n t e g r a t i o n o f a l l e v e r a g i n g i n d i v i d u a l d i v e r s i t y ( c u l t u r e , g e n d e r, • W o r k f o c u s i n g o n s a t i s f y i n g c u s t o m e r s a n d / o r c o - w o r k e r s , a c t i n g e f f e c t i v e l y a n d r a p i d l y. • P r o p o s e n e w s o l u t i o n a n d d o n o t g i v e u p w h e n f a c e d w i t h o b s t a c l e s o r f a i • R e c o g n i z e m e r i t i n c o - w o r k e r s a n d g i v e f e e d b a ck t h a t c a n i m p r o v e t h e i r c o n t r i b u t i o n . l u r e . M i s s i o n • O p e n a c c e s s t o e l e c t r i c i t y f o r m o r e • O p e n t h e w o r l d o f e n e r g y t o n e w p e o p l e . • O p e n u p t o n e w u s e s o f e n e r g y. t e ch n o l o g y. • O p e n u p t o n e w w a y s o f m a n a g i n g e n e r g y f o r p e o p l e . • O p e n u p t o n e w p a r t n e r s h i p s . Consolidated Annual Report 2019 V Va l u e s Tr u s t P r o a c t i v i t y R e s p o n s i b i I n n o v a t i o n i t y l V i s i o n O p e n Po w e r t o t a c k l e s o m e o f t h e w o r l d ’s b i g g e s t c h a l l e n g e s . Enel is Open Power O p e n Po w e r P u r p o s e O p e n Po w e r f o r a b r i g h t e r f u t u r e . We e m p o w e r s u s t a i n a b l e p r o g r e s s . M i s s i o n • O p e n a c c e s s t o e l e c t r i c i t y f o r m o r e • O p e n t h e w o r l d o f e n e r g y t o n e w • O p e n u p t o n e w u s e s o f e n e r g y. • O p e n u p t o n e w w a y s o f m a n a g i n g t e ch n o l o g y. e n e r g y f o r p e o p l e . • O p e n u p t o n e w p a r t n e r s h i p s . p e o p l e . M P V CPPo s i t i o n i n g l e n c e . l a b o r a t e P r i n c i p l e s o f c o n d u c t l y a c t i v i t i e s a n d t a k e • M a k e d e c i s i o n s i n d a i i t y f o r t h e m . i n g t o c o l • S h a r e i n f o r m a t i o n , b e i n g w i r e s p o n s i b i a n d o p e n t o t h e c o n t r i b u t i o n o f o t h e r s . l o w t h r o u g h w i t h c o m m i t m e n t s , p u r s u i n g a c t i v i t i e s w i t h d e t e r m i n a t i o n a n d p a s s i o n . • C h a n g e p r i o r i t i e s r a p i d l y i f t h e s i t u a t i o n e v o l v e s . • G e t r e s u l t s b y a i m i n g f o r e x c e l • A d o p t a n d p r o m o t e s a f e b e h a v i o r a n d m o v e p r o - a c t i v e l y t o i m p r o v e c o n d i t i o n s f o r h e a l t h , l , r e c o g n i z i n g a n d s a f e t y a n d w e l • W o r k f o r t h e i n t e g r a t i o n o f a l l e v e r a g i n g i n d i v i d u a l d i v e r s i t y ( c u l t u r e , g e n d e r, • W o r k f o c u s i n g o n s a t i s f y i n g c u s t o m e r s a n d / o r a g e , d i s a b i c o - w o r k e r s , a c t i n g e f f e c t i v e l y a n d r a p i d l y. • P r o p o s e n e w s o l u t i o n a n d d o n o t g i v e u p w h e n f a c e d w i t h o b s t a c l e s o r f a i • R e c o g n i z e m e r i t i n c o - w o r k e r s a n d g i v e f e e d b a ck t h a t c a n i m p r o v e t h e i r c o n t r i b u t i o n . i t i e s , p e r s o n a l i t y e t c . ) . l - b e i n g . • F o l l u r e . l l l l Future: from vision to action Consolidated Annual Report 2019 Dear shareholders and stakeholders, Our industrial model fully integrates sustainability into our business strategy. In 2019, this enabled us to continue our growth, confirming us as a leader in the main facets of the energy transition. We are the largest private distributor of electricity in the world, with 73 million end users in a variety of the planet’s large urban areas, and we are the leading private operator in renewable energy globally, with 46 GW of managed capacity(1). Among private companies, we have the largest customer base in the world in the retail segment as well, with around 70 million customers, and we are well positioned to seize the opportunities created by the trend towards electrification. Our solid performance in recent years has strengthened the market’s confidence in us. During the year, Enel’s stock price posted a gain of 40%, exceeding €7, outperforming the Italian index (FTSE-MIB: +28%) and the sector index (Euro STOXX Utilities: +22%) and has also been included in the STOXX Europe 50 index, which brings together the fifty largest companies in Europe. The macroeconomic environment In 2019, the global economic growth was sluggish, continuing the slowdown that had already begun in the 2nd Half of 2018. Trade tensions between the United States and China, together with geo-political strains and the persistent clima- te of uncertainty about the outcome of the Brexit negotiations, impacted investment decisions until the final months of the year. Responding to the deteriorating global environment, central banks altered their monetary policy stances, with the Fed and the ECB aggressively cutting interest rates and restoring their quantitative easing policies. 2019 was also marked by a further deceleration in the Chinese economy, while in the United States the economy con- tinued to be supported by resilient domestic demand, with private consumption still strong. Growth in the euro area was modest, averaging +1.2%. This performance mainly reflected the decline in output attribu- table to the weakness of non-European demand, partially offset by a relatively healthy domestic market. In Latin America, economic conditions in 2019 were weaker than in 2018 but the picture was mixed, with countries such as Colombia demonstrating a solid foundation, while others were more exposed to the volatility of the macroe- conomic and political context, including Argentina. Brazil posted a strong recovery in economic activity in the last two quarters of 2019, but the slowdown in the Chinese economy and pressures on commodity prices curbed GDP growth. During 2019, the oil market was buffeted by volatility, with the price of Brent fluctuating up and down. In general, prices were lower than last year, indicating a structural weakness in global demand. The gas market was characterized by a global surplus of LNG demand, which diverted flows to Europe, causing stocks to rise to record levels and a sharp drop in prices. The decrease in the price of gas in combination with strains on the price of CO2, which was especially volatile in 2019, led to a weakening of the competitiveness of coal, especially in the thermal generation sector, which was reflected in a drop in demand and the price of fuel. At the end of 2019, the initial cases of the coronavirus pandemic (COVID-19) were registered in Wuhan (China), placing great strain on the social and economic systems of many countries around the world. Performance In 2019, the Enel Group continued its growth, hitting all the targets we had set ourselves, despite the deterioration in the competitiveness of conventional generation. This prompted us to write down almost all the Group’s coal-fired plants and contributed to the continuing instability in some Latin American economies. More specifically, the Group ended the year with ordinary EBITDA of €17.9 billion, an increase of 10.8% compared with €16.2 billion in 2018, outperforming our guidance to investors. Net ordinary income, the aggregated on which the dividend is calculated, reached €4.8 billion, an increase of 17% compared with the previous year. The dividend for 2019 is about €0.33 per share, an increase of 17% compared with the €0.28 paid in 2018 and the minimum dividend guaran- (1) In addition to installed capacity, this includes that managed by associates or joint ventures (about 3.7 GW). Letter to shareholders and other stakeholders teed to shareholders. The ratio of FFO to net debt, an indicator of our financial strength, reached 26% at the end of the year, exceeding the target set for 2019. Net debt amounted to €45.2 billion, lower than the forecast announced to the market, although higher than the previous year due to the application of new accounting standards, the extraordinary transactions completed during the period and the increase in investment for growth. Main developments On the generation front, Enel reached a new record in 2019, building 3,029 MW of new renewable capacity globally, thanks to a solid, well-diversified and continuously expanding project pipeline. Consolidated installed renewable capaci- ty reached 42 GW and exceeded thermal generation capacity, which declined to 39 GW. This is an important step in the Group’s journey towards a cleaner and more sustainable energy mix, which is also underscored by the rapid reduction in specific CO2 emissions, which fell to 296 g/kWheq (-20% compared with 2018). The target set in 2015 to reduce direct emissions below 350 g/kWheq was thus achieved a year in advance. The Group continued digitalizing its grids, with an increase of 5.9 millions in the number of second generation smart meters installed (for a total of 13.1 millions) and the development of innovative projects such as the Puglia Active Network (Italy) and Urban Futurability (São Paulo, Brazil). These projects are aimed at improving the quality and resilien- ce of power grids, thanks to the use of technologies such as distributed sensors, artificial intelligence and 3D modeling. During the year, the installation of public charging infrastructure for electric vehicles continued in Italy, Spain and Ro- mania and interoperability agreements were reached, giving Enel X customers access to a network of 79,565 charging points. The Group also confirmed its leadership in the energy transition, supporting the electrification of public tran- sport with the supply of charging stations for electric buses in Chile and Colombia. We have also confirmed our ability to assist customers in using energy more efficiently, bringing the capacity of active demand management services to 6.3 GW and the total capacity of batteries installed with industrial customers or directly connected to distribution and transmission grids to 110 MW. An important milestone in the digital transformation was reached in April 2019 with the completion of the migration of the Group’s data and applications to the cloud. Enel is the first of the world’s major utilities to have achieved this goal, with enormous advantages in terms of flexibility, speed, safety, resilience as well as efficiency. This step is also crucial as a technological enabler of new business approaches, such as platform models, which will be increasingly relevant in Enel’s near future. Among extraordinary operations, the sale of the Reftinskaya coal-fired plant in Russia (3.8 GW) by the subsidiary Enel Russia to JSC Kuzbassenergo, a subsidiary of the Siberian Generating Company, was completed. Enel Green Power North America restructured the joint venture with General Electric in the United States through the acquisition of 100% of seven geothermal, wind and solar generation plants, for a total of 650 MW, and the sale of 80% of a 785 MW portfolio of US wind farms to CalPERS. In Brazil, acting through our subsidiary Enel Green Power Brasil Participações Ltda, the Group finalized the sale of 100% of three fully operational renewable plants with a total capacity of 540 MW to the Chinese company CGN Ener- gy International Holdings Co. Limited. In Italy, the Mercure biomass plant was sold to F2i SGR, an operation that was part of an agreement between the Enel Group and F2i SGR for the sale of the entire portfolio of biomass plants in Italy. Finally, in the 1st Half of 2019, using a total return swap (TRS) transaction on Enel Américas shares, the Group increa- sed its stake in that company by 5% and now holds an interest of about 60%. With regard to finance, after the third €1 billion green bond issued in January, the year culminated with the issue of two SDG-Linked bonds, the first bonds in the world linked directly to the Sustainable Development Goals (SDGs) set by the United Nations with its 2030 Agenda. The two operations raised a total of €3.9 billion on the American and Eu- ropean markets, attracting great interest from the international financial community. Oversubscribed by an average of 3.6 times supply and a cost discount of up to 20% compared with conventional financing instruments, the operation led to Enel winning the “ESG Issuer of the Year” award from International Financing Review. Strategy and forecasts for 2020-2022 The world of utilities is experiencing an era of profound transformation, mainly driven by the challenge of decarbonizing the energy sector. The progressive shift of generation from fossil fuels to renewable sources, together with the accele- Consolidated Annual Report 2019ration in the electrification of final consumption, will be the main trends in the energy transition. Energy infrastructures and digital platforms will be key factors in enabling this transition and achieving the United Nations’ Sustainable Deve- lopment Goals. The sustainable strategy and the integrated business model developed in recent years have allowed the Group to constantly create value and will allow us to benefit from the opportunities emerging from this transition, while limiting the related risks. Thanks to a development model based on the organic build-out of renewable generation assets that gives us great flexibility in the use of capital, the Group is capable of responding swiftly to any unexpected scenario changes that could be triggered by the pandemic that has been spreading around the world in these last few months. In November 2019, Enel presented the 2020-2022 Strategic Plan, which, while confirming the strategic direction alre- ady set explicitly integrates the SDG objectives into our financial strategy. The growth path outlined in the Plan shows a steady acceleration in performance, with a target for the Group’s ordinary EBITDA of €20.1 billion in 2022, compared with €17.9 billion in 2019 (+12%). In the next three years, the Group expects gross organic capex of around €28.7 billion (an increase of 11% compared with the previous plan), of which more than 90% is attributable to the four SDGs on which the strategy is based: SDG 7 - Affordable and Clean Energy; SDG 9 - Industry, Innovation and Infrastructure; SDG 11 - Sustainable Cities and Com- munities; and SDG 13 - Climate Action. Of total organic investment, more than €12.5 billion will be dedicated to the construction and maintenance of re- newable generation plants, with renewable capacity to reach 60 GW by 2022. At the same time, the Group will conti- nue to progressively eliminate coal-fired generation, with a 74% decrease in such output as early as 2022. This strategy is consistent with Enel’s commitment to the fight against climate change, which was further strengthe- ned in September 2019 with the setting of a new target: reducing direct CO2 emissions per kWh by 70% by 2030, compared with 2017 levels. This target has been certified by the Science Based Targets initiative, the world’s most authoritative initiative to support the definition of science-based targets that encourage companies to support the transition towards a zero-emission economy, in line with the objectives of the Paris Agreement. In parallel, Enel has set another new target, also certified by the Science Based Targets initiative, namely to reduce indirect emissions associa- ted with the consumption of gas by Enel end users by 16% by 2030. With regard to grids, investments of around €11.8 billion are planned, with the aim of further improving their resilience, quality and efficiency, thanks in part to the use of the new generation of smart meters, which in 2022 will number al- most 29 millions, and the adoption of a platform business model that will make operations in all the countries in which we operate more effective. Finally, the Group will invest a total of €2.3 billion in the retail segment and in Enel X to strengthen the central role of the customer, gaining an advantageous position in view of the growing electrification of energy consumption. The development of global platforms and ecosystems will allow us to make new services available to customers, enabling further creation of value for the Group. By 2022, there will be around 35 million customers in the free market, with 10.1 GW of active demand management capacity and 736 MW of installed electricity storage. The soundness of our business model and the flexibility noted above in the use of cash flows in organic investment enable us to confirm the dividend policy based on a pay-out of 70% of the Group’s net ordinary income and to extend the minimum dividend per share for the entire 2020-2022 period, with Enel expecting to use its profits in 2020-2022 to pay the greater between a) a dividend per share based on a pay-out of 70%; and b) a minimum dividend per share of €0.35, €0.37 and €0.40 respectively. At a moment of great instability in the global scenario, we face the future with confidence, drawing strength from what we have built and the value of our people. Patrizia Grieco Chairman of the Board of Directors Francesco Starace Chief Executive Officer and General Manager Letter to shareholders and other stakeholders REPORT ON OPERATIONS 1. 2. 3. Enel Group Governance Strategy & Risk Management Highlights - Group 13 Enel shareholders 20 Reference scenario Highlights - Business Lines 14 Corporate boards 21 Group strategy Business model Enel around the world The Enel corporate governance system 16 17 Enel organizational model Incentive system Values and pillars of corporate ethics Risk management 22 26 28 30 34 45 57 Letter to shareholders and other stakeholders 5 Consolidated Annual Report 2019 CONSOLIDATED FINANCIAL STATEMENTS 4. 5. 6. Performance & Metrics Outlook Consolidated financial statements Definition of performance indicators Performance of the Group Analysis of the Group’s financial position and financial structure Enel shares People centricity 76 79 91 97 100 The innovation ecosystem 106 Value created for stakeholders Results by business area 108 109 Significant events in 2019 145 Regulatory and rate issues 149 Outlook 158 Consolidated financial statements Notes to the financial statements Declaration of the Chief Executive Officer and the officer responsible Reports 166 173 332 334 - Report of the Board of Statutory Auditors to the Shareholders’ Meeting of Enel SpA - Report of the Audit Firm 334 350 Attachments 358 - Subsidiaries, associates and other significant equity investments of the Enel Group at December 31, 2019 358 10 Relazione Finanziaria Annuale 20191. ENEL GROUP REPORT ON OPERATIONS 12 Consolidated Annual Report 2019 Highlights Highlights - Group Revenue (millions of euro) Gross operating margin (millions of euro) Ordinary gross operating margin (millions of euro) 17,704 17,905 16,351 8.3% 16,158 10.8% 80,327 75,575 6.3% 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 18,000 15,000 12,000 9,000 6,000 3,000 0 2018 2019 2018 2019 2018 2019 Net income attributable to shareholders of the Parent Company (millions of euro) Ordinary net income attributable to shareholders of the Parent Company (millions of euro) Net ﬁnancial debt (millions of euro) 4,789 5,000 4,000 3,000 2,000 1,000 0 2,174 -54.6% 4,767 4,060 17.4% 45,175 41,089 9.9% 50,000 40,000 30,000 20,000 10,000 0 2018 2019 2018 2019 2018 2019 Cash ﬂows from operating activities (millions of euro) Capital expenditure on property, plant and equipment and intangible assets (1) (millions of euro) Employees (no.) Injuries “High Consequence” Enel (no.) 11,075 11,251 1.6% 12,000 10,000 8,000 6,000 4,000 2,000 0 68,253 -1.5% 8,152 22.0% 12,000 10,000 8,000 6,000 4,000 2,000 0 80,000 70,000 69,272 9,947 60,000 50,000 40,000 30,000 20,000 10,000 0 100 90 80 70 60 50 40 30 20 10 0 5 3 2018 2019 2018 2019 2018 2019 2018 -40% 2019 (1) The ﬁgure for 2019 does not include €4 million regarding units classiﬁed as “held for sale” (€378 million in 2018). Highlights - Group 13 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsHighlights Highlights - Business Lines Total net efﬁcient installed capacity (GW) Net efﬁcient installed capacity - (Composition) (1) (%) Additional efﬁcient installed renewable capacity (GW) 85.6 84.3 -1.5% 100 90 80 70 60 50 40 30 20 10 0 100 90 80 70 60 50 40 30 20 10 0 54% 50% 46% 8.7% 50% 4 3 2 1 0 Traditional sources Renewable sources 3.58 2.68 33.6% 2018 2019 2018 2019 2018 2019 (1) The percentage of net efﬁcient renewable installed capacity is the ratio (in percentage terms) of installed renewable generation capacity to total installed capacity. Net electricity generation (TWh) Net electricity generation - (Composition) (TWh) CO2 (Speciﬁc CO2 emissions g/kWheq) 250 200 150 100 50 0 250.3 229.1 -8.5% 151.4 129.7 500 400 300 200 100 98.9 0.5% 99.4 Traditional sources 0 Renewable sources 2018 2019 2018 2019 369 296 -19.8% 2018 2019 Charging points (no.) Demand Response (MW) 79,565 48,967 62.5% 6,215 6,297 1.3% 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Storage (MW) 120 100 80 60 40 20 0 110 70 57.1% 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 14 End users (millions) 72.9 73.3 0.4% End users with active smart meters (millions) 43.8 44.7 2.1% 2018 2019 2018 2019 Electricity distribution and transmission grid (thousands of km) 2,226 2,230 0.2% Electricity transported on Enel’s distribution grid (TWh) 504 484 4.1% 70 60 50 40 30 20 10 0 2,500 2,000 1,500 1,000 500 0 500 400 300 200 100 0 2018 2019 2018 2019 G l o & b N a l In e t w fra o rk s structure T r a d in g R etail 300 250 200 150 100 50 0 l G E n e l X Retail customers (millions) Retail customers - free market (millions) Electricity sold by Enel (TWh) 295.4 301.7 2.1% 71.1 69.9 -1.7% 21.5 22.8 6.1% 70 60 50 40 30 20 10 0 al b o wer n Global Po G eneratio 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 Consolidated Annual Report 2019 Highlights Total net efﬁcient installed capacity (GW) 100 85.6 84.3 -1.5% Net efﬁcient installed capacity - (Composition) (1) Additional efﬁcient installed renewable capacity (GW) 54% 50% 3.58 2.68 33.6% 46% 8.7% 50% Traditional sources Renewable sources (1) The percentage of net efﬁcient renewable installed capacity is the ratio (in percentage terms) of installed renewable generation capacity to total installed capacity. 2018 2019 2018 2019 2018 2019 Net electricity generation Net electricity generation - (TWh) (Speciﬁc CO2 emissions g/kWheq) 250.3 229.1 -8.5% (Composition) (TWh) 151.4 4 3 2 1 0 CO2 500 400 300 200 100 129.7 369 296 -19.8% 98.9 0.5% 99.4 Traditional sources 0 Renewable sources 2018 2019 wer n Global Po G eneratio 2018 2019 2018 2019 Charging points Demand Response (MW) 79,565 48,967 62.5% 6,215 6,297 1.3% Storage (MW) 120 100 80 60 40 20 0 110 70 57.1% 90 80 70 60 50 40 30 20 10 0 250 200 150 100 50 0 (no.) 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 (%) 100 90 80 70 60 50 40 30 20 10 0 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 End users (millions) End users with active smart meters (millions) 72.9 73.3 0.4% 70 60 50 40 30 20 10 0 43.8 44.7 2.1% 2018 2019 2018 2019 Electricity distribution and transmission grid (thousands of km) Electricity transported on Enel’s distribution grid (TWh) 504 484 4.1% 2,226 2,230 0.2% 2,500 2,000 1,500 1,000 500 0 500 400 300 200 100 0 2018 2019 2018 2019 G l & o b N a l In e t w o fra rk s structure al b o l G T r a d in g R etail E n e l X Retail customers (millions) Retail customers - free market (millions) Electricity sold by Enel (TWh) 295.4 301.7 2.1% 71.1 69.9 -1.7% 70 60 50 40 30 20 10 0 21.5 22.8 6.1% 300 250 200 150 100 50 0 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 Highlights - Business Lines 15 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements Modello di Business Business model The Enel Group is committed to developing its business model In order to be able to effectively face all the risks and seize all in line with the objectives of the Paris Agreement (COP21), i.e. the opportunities that the rapidly changing energy sector pre- to limit the increase in global average temperature to less than sents, Enel’s business model has defined roles for all of the 2 °C above pre-industrial levels and to do everything possible Group’s major organizational units. Each Country operates in its to limit the increase to 1.5 °C. In 2019, Enel officially renewed geographical area in a matrix relationship with the broader Glo- this commitment, responding to the request for action by the bal Business Lines, managing activities such as relations with United Nations by signing a commitment to take action to limit local communities, regulatory authorities, retail markets, local the increase in global temperatures to 1.5 °C and to achieve zero communication and so on. The mission of each business can be emissions by 2050. summarized as follows. Global Power Generation: the Group operates through this new integrated Business Line formed in 2019 to accelerate the energy transition, conti- nuing to increase investments in new renewable energy capacity, and manages the decarboniza- tion of its generation mix and the countries in which it operates, always aiming to ensure the safety and capacity of electrical systems. Global Power G eneration Global Infrastructure & Networks: in developing and operating infrastructure that enables the energy transition, the Group ensures the reliabi- lity in the supply of energy and the quality of service to communities through resilient and leveraging efﬁciency, ﬂexible networks, technology and digital innovation, and ensu- ring appropriate returns on investment and cash generation. G l & o b N a e t w l Infra o r k s structure al b o l G T r a d i n g Enel X: this Business Line is enabling the energy transition by acting as an accelerator for electriﬁcation and decarbonization of customers, helping them to use energy more efﬁciently, leveraging the assets of the Enel Group through the delivery of innovative services. E n e l X R etail Retail: through its sales relationships with end users, the Group interacts locally with millions of families and compa- nies. Thanks to our technology, the platform model enables us to improve customer satisfaction and the customer experience, while at the same time achieving ever higher levels of efﬁciency. The business units optimize the supply of power to their customer base, maximizing the value generated by that resource and fostering long-term relationships with customers. Global Trading: this Business Line manages our combined margin on generation and sales as a single portfolio in which Generation and Retail operations are always balanced effectively. Taking advantage of the synergies between the different bu- impacts, meet the needs of customers and the local communi- siness areas, acting through the lever of innovation, and con- ties in which it operates and ensure high standards of safety for ducting its operations on the basis of Open Power principles, the employees and suppliers. Enel Group seeks to develop solutions to reduce environmental 16 Consolidated Annual Report 2019 Enel around the world The Enel Group has a presence in 48 countries on the various continents, with more than 850 subsidiaries. The following map shows the distribution of the Enel Group across the globe. Localizzazione geograﬁca di Enel Il Gruppo ENEL è presente in 48 paesi nei diversi continenti con oltre 850 società controllate. Di seguito la distribuzione geograﬁca: Enel around the world 17 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements18 Relazione Finanziaria Annuale 20192. GOVERNANCE REPORT ON OPERATIONS 19 Enel shareholders At December 31, 2019, the fully subscribed and paid-up sha- unchanged compared with that registered at December 31, re capital of Enel SpA (“Enel” or the “Company”) totaled 2018. Note that a total of 1,549,152 treasury shares were ac- €10,166,679,946, represented by the same number of ordi- quired in 2019. nary shares with a par value of €1.00 each. Share capital is Significant shareholders At December 31, 2019, based on the shareholders register shareholders with an interest of greater than 3% in the Com- and the notices submitted to CONSOB and received by the pany’s share capital included the Ministry for the Economy Company pursuant to Article 120 of Legislative Decree 58 and Finance (with a 23.585% stake) and Capital Research and of February 24, 1998, as well as other available information, Management Company (with a 5.029% stake). Composition of shareholder base Since 1999, Enel has been listed on the Mercato Telematico of the share capital (compared with 10.5% at December 31, Azionario organized and operated by Borsa Italiana SpA. Enel’s 2018), while investors who have signed the Principles for shareholders include leading international investment funds, Responsible Investment represent 43% of the share capital insurance companies, pension funds and ethical funds. (compared with 39.1% at December 31, 2018). The number of Environmental, Social and Governance (ESG) investors in Enel has been rising steadily: at December 31, 2019, socially responsible investors (SRIs) held around 10.8% Shareholder composition at December 2019 100% 23.6% 16.1% Ministry for the Economy and Finance Retail investors 60.3% Institutional investors 20 Consolidated Annual Report 2019Corporate boards BOARD OF DIRECTORS Chief Executive Officer and General Manager Francesco Starace Secretary Silvia Alessandra Fappani Chairman Patrizia Grieco Directors Alfredo Antoniozzi Alberto Bianchi Cesare Calari Paola Girdinio Alberto Pera Anna Chiara Svelto Angelo Taraborrelli Gender diversity on the Board of Directors (no.) Age diversity on the Board of Directors (%) <30 Age diversity on the Board of Directors (%) 30-50 Age diversity on the Board of Directors (%) >50 2019 2018 3 3 11% 89% 100% BOARD OF STATUTORY AUDITORS Auditors Romina Guglielmetti Claudio Sottoriva Chairman Barbara Tadolini Alternate auditors Maurizio De Filippo Francesca Di Donato Piera Vitali AUDIT FIRM EY SpA Corporate boards 21 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsThe Enel corporate governance system The corporate governance system of Enel SpA (“Enel” or the ders over the long term, taking into account the social impor- “Company”) complies with the principles set forth in the Cor- tance of the Group’s business operations and the consequent porate Governance Code for listed companies (the “Corporate need, in conducting such operations, to adequately consider Governance Code”), as amended in July 2018, adopted by the all the interests involved. Company, and is also inspired by international best practice. In compliance with Italian legislation governing listed compa- The corporate governance system adopted by Enel and its nies, the Group’s organization comprises the following bodies. Group is essentially aimed at creating value for the sharehol- SM SHAREHOLDERS' MEETING Audit Firm EY SpA BOD BOARD OF DIRECTORS BSA BOARD OF STATUTORY AUDITORS CRC CONTROL AND RISK COMMITTEE NCC NOMINATION AND COMPENSATION COMMITTEE CGSC CORPORATE GOVERNANCE AND SUSTAINABILITY COMMITTEE RPC RELATED PARTIES COMMITTEE 22 Consolidated Annual Report 2019It is charged with deciding, among other things, in either ordinary or extraordinary session: > the appointment and removal of the members of the Board of Directors and the Board of Statutory Auditors and their compensation and undertaking any stockholder actions; > the approval of the financial statements and the allocation of profit; Shareholders’ Meeting > the purchase and sale of treasury shares; > remuneration policy and its implementation; > share ownership plans; > amendments to the bylaws; > mergers and demergers; > the issue of convertible bonds. Board of Directors 14 meetings held by the Board in 2019, in 8 of which it addressed issues connected with climate and their impact on strategies, operations and sustainability > It is charged with managing the Company and is therefore vested by the bylaws with the broadest powers for the ordinary and extraordinary management of the Company, and specifically has the power to carry out all the actions it deems advisable to implement and achieve the corporate pur- pose. > With regard to the issue of sustainability(1), including climate change, it is responsible for examining and approving the corporate strategy, including the Group’s annual budget and Business Plan, which incorporate the main objectives and actions that the Company plans to undertake to lead the energy transition and tackle climate change, promoting a sustainable business model that creates long-term value. > It also performs a policy-setting role and provides an assessment of the adequacy of the internal con- trol and risk management system (the ICRMS), determining the nature and level of risk compatible with the strategic objectives of the Company and the Group. The ICRMS consists of the set of rules, procedures and organizational structures designed to enable the identification, measurement, ma- nagement and monitoring of the main risks to which the Company and its subsidiaries are exposed. These risks include those that could arise in a medium- to long-term perspective, including the risks associated with climate change. In compliance with the provisions of the Italian Civil Code, the Board of Directors has delegated part of its management duties to the CEO and, in accordance with the recommendations of the Corporate Governance Code and applicable legislation, has appointed the following committees from among its members to provide recommendations and advice. Corporate Governance and Sustainability Committee 8meetings held by the Committee in 2019, in 5 of which it addressed issues connected with climate and their impact on strategies, operations and sustainability > It assists the Board of Directors in assessment and decision-making activities concerning, among other things, sustainability, including any relevant climate issues connected with the operations of the Group and its interaction with all stakeholders. > A majority of its members are independent directors and in 2019 it was composed of a Chairman and two independent directors. > With regard to sustainability issues, it examines: - the guidelines of the Sustainability Plan, including the climate objectives set out in the plan; - the general structure of the Sustainability Report, which includes the Non-Financial Statement, and the approach to disclosures on climate change adopted in those documents, issuing a prior opinion to the Board of Directors, which is responsible for approving these documents. (1) Sustainability comprises issues connected with climate change, atmospheric emissions, managing water resources, biodiversity, the circular economy, health and safety, diversity, management and development of employees, relations with communities and customers, the supply chain, ethical conduct and human rights. The Enel corporate governance system 23 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsControl and Risk Committee 12meetings held by the Committee in 2019, in 6 of which it addressed issues connected with climate and their impact on strategies, operations and sustainability Nomination and Compensation Committee 8meetings held by the Committe in 2019 Related Parties Committee 1 meeting held by the Committe in 2019 Board of Statutory Auditors 17meetings held by the Board in 2019 Chairman of the Board of Directors 24 > It supports the Board of Directors in performing its duties regarding internal control and risk mana- gement, as well as evaluating the periodic financial reports. > It is composed of non-executive directors, the majority of whom (including its Chairman) are inde- pendent. In 2019 it was made up of four independent directors. > It also examines the content of the consolidated financial statements and the Sustainability Report, which includes the Non-Financial Statement relevant for the purposes of the ICRMS and contains corporate disclosures on climate issues, issuing a prior opinion on these aspects to the Board of Directors, called to approve those documents. > It supports the Board of Directors in decisions concerning the size and composition of the Board itself, as well as the remuneration of executive directors and key management personnel. > It is composed of non-executive directors, the majority of whom (including its Chairman) are inde- pendent. In 2019, it was made up of four independent directors. > In 2019, it confirmed the establishment of performance targets connected with sustainability issues for the short- and long-term variable remuneration of top management. > It performs the functions provided for in the relevant CONSOB regulations and in the specific Enel procedure for transactions with related parties, issuing in particular a reasoned opinion on the tran- sactions governed by the procedure. > It is composed of independent, non-executive directors. In 2019, it was made up of four independent directors. It is charged with overseeing: > compliance with the law and the bylaws, as well as compliance with the principles of sound administration in carrying out corporate activities; > the financial reporting process and the appropriateness of the organizational structure, the internal control system and the administrative-accounting system of the Company; > the statutory audit of the annual accounts and the consolidated accounts, as well as the independence of the Audit Firm; > the approach adopted in implementing the corporate governance rules envisaged by the Corporate Go- vernance Code. > The Chairman is vested by the bylaws with the powers to represent the Company and to sign on its behalf. > Presides over Shareholders’ Meetings. > Convenes the meetings of the Board of Directors, establishes the agenda and presides over its pro- ceedings, ensuring that sufficient information on the issues being addressed in the agenda is provi- ded in a timely manner to all members of the Board of Directors and the Board of Statutory Auditors. > Ascertains that the Board’s resolutions are carried out. > Pursuant to a Board resolution of May 5, 2017, the Chairman has been vested with a number of ad- ditional non-executive powers. > In the exercise of the function of stimulating and coordinating the activities of the Board of Direc- tors, the Chairman plays a proactive role in the process of approving and monitoring of corporate and sustainability strategies, which are sharply focused on the decarbonization and electrification of energy consumption. > In addition, during 2019 the Chairman also chaired the Corporate Governance and Sustainability Committee. Consolidated Annual Report 2019Chief Executive Officer > Like the Chairman of the Board of Directors, the CEO is vested by the bylaws with the powers to re- present the Company and to sign on its behalf, and in addition is vested by a Board resolution of May 5, 2017 with all powers for managing the Company, with the exception of those that are otherwise assigned by law or the bylaws or that the aforesaid resolution reserves for the Board of Directors. > In the exercise of these powers, the CEO has defined a sustainable business model, delineating a strategy to lead the energy transition towards a low-carbon model. > The CEO reports to the Board of Directors and the Board of Statutory Auditors on the activities perfor- med in the exercise of the powers granted to him, including business activities consistent with Enel’s commitment to address climate change. > The CEO has also been designated as the director responsible for the ICRMS. > He represents Enel in various initiatives that deal with sustainability, holding positions of leadership in world-renowned institutions such as the United Nations Global Compact and the Global Investors for Sustainable Development (GISD) Alliance launched by the United Nations in 2019. Statutory audit of the accounts > This is performed by a specialized firm entered in the appropriate register of auditors, which is appointed by the Shareholders’ Meeting on the basis of a reasoned proposal from the Board of Statutory Auditors. Good corporate governance practices > In 2019, the Company also organized a special induction program to provide the directors with an under- standing of the sectors in which the Group operates, including issues related to climate change and the related impact on industrial strategy and corporate operations. > At the end of 2019 and during the first two months of 2020, the Board of Directors carried out, with the assistance of a specialized independent advisor, an assessment of the size, composition and functioning of the Board and its committees (the “board review”), in line with the most advanced corporate governance practices accepted at the international level and incorporated within the Cor- porate Governance Code. This board review also analyzed specific aspects concerning the asses- sment of sustainability issues by the Board of Directors. The board review was carried out using a “peer review” approach, i.e. evaluating not only the operation of the body as a whole, but also the style and substance of the contribution made by each of its members. The results of the board review confirmed an extremely positive overall picture of the operation of Enel’s Board of Directors and Board committees, indicating that these bodies operate effectively and transparently, in strict compliance with national and international best practice in the field of corporate governance, as confirmed by the advisor. For more detailed information on the corporate governance the Company’s website (http://www.enel.com, in the “Gover- system, please see the Report on Corporate Governance and nance” section). Ownership Structure of Enel, which has been published on The Enel corporate governance system 25 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsEnel organizational model The Enel Group structure is organized into a matrix that comprises: The Global Business Lines are responsible for managing and developing assets, optimizing their performance and the return on capital employed in the various geographical areas in which the Group operates. The Business Lines are also tasked with improving the efficiency of the processes they manage and sharing best practices at the global level. The Group, which also draws on the work of an Investment Committee(2), benefits from a centralized industrial vision of projects in the various Business Lines. Each project is assessed not only on the basis of its financial return but also in relation to the Global Business Lines best technologies available at the Group level, which reflect the new strategic line adopted, explicitly integrating the SDGs within our financial strategy and promoting a low-carbon business model. Furthermore, each Business Line contributes to guiding Enel’s leadership in the energy transition and in the fight against climate change, managing the associated risks and opportunities in its area of competence. In 2019, Global Power Generation was created with the merger of Enel Green Power and Global Thermal Generation to confirm the Enel Group’s leading role in the energy transition, pursuing an integrated process of decarbonization and the sustainable development of renewable capacity. In addition, the Grid Blue Sky project was launched. Its objective is to innovate and digitalize infrastructures and networks in order to make them an enabling factor for the achievement of the Climate Action objectives, thanks to the progressive transformation of Enel into a platform-based group. Regions and Countries are responsible for managing relationships with institutional bodies and regulatory authorities, as well as selling electricity and gas, in each of the countries in which the Group is present, while also providing staff and other service support to the Business Lines. They are also charged with promoting decarbonization and guiding the energy transition towards a low-carbon business model within their areas of responsibility. In 2019, the Group’s geographical organization in the Americas was revised with the creation of the North America Region, which includes Mexico, and the integration of Costa Rica, Guatemala and Panama into the Latin America region. Regions and Countries The following functions provide support to Enel’s business operations: The Global Service Functions are responsible for managing information and communication technology Global Service Functions activities and procurement at the Group level. They are also responsible for adopting sustainability criteria, including climate change issues, in managing the supply chain and developing digital solutions to support the development of enabling technologies for the energy transition and the fight against climate change. Holding Company Functions The Holding Company Functions are responsible for managing governance processes at the Group level. The Administration, Finance and Control function is also responsible for consolidating scenario analysis and managing the strategic and financial planning process aimed at promoting the decarbonization of the energy mix and the electrification of energy demand, key actions in the fight against climate change. (2) The Group Investment Committee is made up of the heads of Administration, Finance and Control, Innovability, Legal and Corporate Affiars, Global Procure- ment, the heads of the Regions and the Business Lines. 26 Consolidated Annual Report 2019C Enel Group Chairman P. Grieco HLD HOLDING FUNCTIONS CEO Enel Group CEO F. Starace Administration, Finance and Control A. De Paoli People and Organization F. Di Carlo Communications R. Deambrogio Innovability E. Ciorra Global Procurement S. Bernabei Legal and Corporate Affairs G. Fazio Audit S. Fiori Global Digital Solutions C. Bozzoli GBL GLOBAL BUSINESS LINE CRCOUNTRY AND REGION Global Infrastructure & Networks –– L. Gallo Global Trading Global Power Generation Enel X –– C. Machetti –– A. Cammisecra –– F. Venturini Italy | C. Tamburi Iberia | J. D. Bogas Gálvez Europe and Euro-Mediterranean Affairs | S. Mori Africa, Asia and Oceania | A. Cammisecra North America | E. Viale Latin America | M. Bezzeccheri Enel organizational model 27 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsIncentive system Enel’s remuneration policy for 2019, which was adopted by differentiated by the functions and responsibilities as- the Board of Directors acting on a proposal of the Nomination signed to them; and Compensation Committee and received considerable ap- > a long-term variable component linked to participation in proval from the shareholders on the occasion of the Sharehol- specific long-term incentive plans. In particular, for 2019 ders’ Meeting of May 16, 2019, was formulated on the basis long-term variable remuneration is linked to participation of national and international best practice, the guidance pro- in the Long-Term Incentive Plan 2019 (“2019 LTI Plan”), vided by the favorable vote of the Shareholders’ Meeting of which establishes three-year performance targets for the May 24, 2018 on the remuneration policy for 2018 as well as following: the results of the engagement activity on corporate governan- - Enel’s average TSR (Total Shareholder Return) compa- ce issues pursued by the Company between December 2018 red with the average TSR for the Euro STOXX Utilities and February 2019 with the leading proxy advisors and Enel’s - EMU index for the 2019-2021 period; institutional investors. In line with the recommendations of - ROACE (Return on Average Capital Employed), cumula- the Corporate Governance Code for listed companies, Enel’s tive for 2019-2021; remuneration policy for 2019 is designed to attract, motivate - CO2 emissions of Enel Group generation plants in 2021. and retain personnel possessing the professional skills most suitable to successfully managing the Company, incentivizing The 2019 LTI Plan establishes that any bonus accrued is re- achievement of our strategic objectives and ensuring sustai- presented by an equity component, which can be supplemen- nable growth. It is also structured so as to align the interests ted – depending on the level of achievement of the various of management with the priority objective of creating sustai- targets – by a cash component. More specifically, the Plan nable value for shareholders in the medium/long term and envisages that 100% of the basic bonus of the Chief Executi- promoting the Enel mission and our corporate values. ve Officer and General Manager and 50% of the basic bonus The 2019 remuneration policy adopted for the Chief Executive of key management personnel will be paid in Enel shares pre- Officer and General Manager and key management personnel viously acquired by the Company. envisages: > a fixed component; The disbursement of a significant portion of long-term va- riable remuneration (70% of the total) is deferred to the se- > a short-term variable component (MBO) that will be paid cond year following the three-year performance period cove- out on the basis of achievement of specific performance objectives. Namely: - for the CEO, short-term objectives have been set for red by the 2019 LTI Plan. The establishment of a target in the 2019 LTI Plan for CO2 emissions (grams per kWh equivalent produced by the Group the following components: in 2021) and a target in the short-term variable remuneration • consolidated net ordinary income; system of the Chief Executive Officer and General Manager • funds from operations/consolidated net financial linked to workplace safety is designed to promote the imple- debt; • Group opex; • workplace safety; mentation of a sustainable business model. A detailed description of the remuneration policy for 2019 and of remuneration paid in 2018 is provided in Enel’s 2019 Remunera- - for key management personnel, objective annual go- tion Report available on the Company’s website (www.enel.com). als connected with their business area have been set, 28 Consolidated Annual Report 2019LTI PLAN (Long-Term Incentive) VESTING PERIOD PAYOUT 30%(1) PAYOUT OF 70%(1) Year 1 Year 2 Year 3 Year 4 Year 5 3-year performance period Verify achievement Deferred payment (1) If performance targets are achieved. Enel share-based incentive plan On May 16, 2019, the Ordinary Shareholders’ Meeting of subject to the achievement of specific performance targets Enel SpA (“Enel” or the “Company”) approved the Long- during the 2019-2021 period (the so-called performance pe- Term Incentive Plan for 2019 (“2019 LTI Plan” or “Plan”) for riod). If these targets are achieved – and depending on the le- the management of Enel and/or its subsidiaries pursuant to vel of achievement – 30% of the stock and cash components Article 2359 of the Italian Civil Code, granting the Board of of the incentive will be paid to the beneficiaries in 2022 and Directors all the necessary powers to implement the Plan. the remaining 70% in 2023. The beneficiaries of the Plan – whose characteristics are descri- In accordance with the resolution of the Board of Directors bed in detail in the information document prepared pursuant to of September 19, 2019 – which in implementation of the au- Article 84-bis of the CONSOB Regulation issued with Resolu- thorization granted by the Shareholders’ Meeting of May 16, tion no. 11971 of May 14, 1999, which is available to the public 2019 and in compliance with the related terms, approved the in the section of Enel’s website (www.enel.com) dedicated to start of a share buyback program to support the 2019 LTI the Shareholders’ Meeting of May 16, 2019 – are the Chief Exe- Plan in the maximum amount of €10.5 million and a maxi- cutive Officer/General Manager of Enel and the managers of mum number of 2.5 million shares – between September 23, the Enel Group who occupy key positions directly responsible 2019 and December 2, 2019, the Company purchased a total for corporate performance or considered of strategic interest. It of 1,549,152 treasury shares (equal to about 0.015% of sha- provides for the award to the beneficiaries of an incentive consi- re capital) at a weighted average price of €6.7779 per share sting of a stock component and a cash component. with a total value of €10,499,998.93. In granting the shares This incentive – determined, at the time of the award, on a under the Plan, 1,538,547 shares were awarded, although base value calculated in relation to the fixed remuneration of actual disbursement to the beneficiaries remains subordinate the individual beneficiary – may vary depending on the degree to the level of achievement of the performance targets. of achievement of each of the three-year performance targets The cost of the Plan is determined with reference to the fair value by the Plan, ranging from zero up to a maximum of 280% or of the equity instruments assigned during the year and is reco- 180% of the base value in the case, respectively, of the Chief gnized over the duration of the vesting period in equity reserves. Executive Officer/General Manager or the other beneficiaries. Considering the market price of the Enel share on the grant The 2019 LTI Plan also provides that, of the total incentive date (i.e., November 12, 2019), equal to €6.983, the fair value effectively vested, the bonus will be fully paid in shares in of the equity instruments on that date, taking account of the the amount of (i) up to 100% of the base value for the Chief number of shares granted, is equal to €10,743,674. Executive Officer/General Manager and (ii) up to 50% of the The fair value of the financial instruments pertaining to the base value for the other beneficiaries. year, determined on the basis of the market price of the stock The actual award of the bonus under the 2019 LTI Plan is at the end of the period, is equal to €350,987. Incentive system 29 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsValues and pillars of corporate ethics A robust system of ethics underlies all activities of the Enel of Ethics, the Compliance Model under Legislative Decree Group. This system is embodied in a dynamic set of rules 231/2001, the Enel Global Compliance Program, the Zero-To- constantly oriented towards incorporating national and inter- lerance-of-Corruption Plan, the Human Rights Policy and any national best practices that everyone who works for and with other national compliance models adopted by Group compa- Enel must respect and apply in their daily activities. The sy- nies in accordance with local laws and regulations. stem is based on specific compliance instruments: the Code Code of Ethics In 2002, Enel adopted a Code of Ethics, which expresses the general principles set out in the Code. Company’s ethical responsibilities and commitments in con- Any violations or suspected violations of Enel Compliance ducting business, governing and standardizing corporate con- Programs can be reported, including in anonymous form, duct on the basis of standards aimed to ensure the maximum through a single Group-level platform (the “Ethics Point”). In transparency and fairness with all stakeholders. 2019, the Code was updated to reflect a number of internatio- The Code of Ethics is valid in Italy and abroad, taking due nal provisions concerning human rights and align the duties of account of the cultural, social and economic diversity of the the units responsible for updating the document with current various countries in which the Group operates. Enel also re- organizational arrangements. quires that all associates and other investees and its main suppliers and partners adopt conduct that is in line with the No. Total reported violations of the Code of Ethics Confirmed violations of the Code of Ethics (1) - of which violations involving conflicts of interest/bribery 2019 166 36 8 2018 144 31 10 Change 22 5 (2) 15.3% 16.1% -20.0% (1) The analysis of reports received in 2018 was completed in 2019. For that reason, the number of verified violations for 2018 was restated from 30 to 31. The additional violation is attributable to an issue with compliance with overtime regulations by a supplier Compliance Model (Legislative Decree 231/2001) Legislative Decree 231 of June 8, 2001 introduced into Italian adopt, back in 2002, this sort of compliance model that met law a system of adimistrative (and de facto criminal) liability for the requirements of Legislative Decree 231/2001 (also known companies for certain types of offenses committed by their as “Model 231”). It has been constantly updated to reflect de- directors, managers or employees on behalf of or to the be- velopments in the applicable regulatory framework and cur- nefit of the company. Enel was the first organization in Italy to rent organizational arrangements. 30 Consolidated Annual Report 2019Enel Global Compliance Program (EGCP) The Enel Global Compliance Program for the Group’s foreign Program – which encompasses standards of conduct and are- companies was approved by Enel in September 2016. It is a as to be monitored for preventive purposes – is based on illicit governance mechanism aimed at strengthening the Group’s conduct that is generally considered such in most countries, ethical and professional commitment to preventing the com- such as corruption, crimes against the government, false ac- mission of crimes abroad that could result in criminal liability counting, money laundering, violations of regulations gover- for the company and do harm to our reputation. Identification ning safety in the workplace, environmental crimes, etc. of the types of crime covered by the Enel Global Compliance Zero-Tolerance-of-Corruption Plan and the anti-bribery management system In compliance with the tenth principle of the Global Compact, transparency in conducting company business and operations according to which “businesses should work against corrup- and to safeguard our image and positioning, the work of our tion in all its forms, including extortion and bribery”, Enel is employees, the expectations of shareholders and all of the committed to combating corruption. For this reason, in 2006 Group’s stakeholders. Following receipt of the ISO 37001 an- we adopted the “Zero-Tolerance-of-Corruption (ZTC) Plan”, ti-corruption certification by Enel SpA in 2017, the 37001 certi- confirming the Group’s commitment, as described in both the fication plan has gradually been extended to the main Italian Code of Ethics and the Model 231, to ensure propriety and and international subsidiaries of the Group. Human Rights Policy In order to give effect to the United Nations Guiding Principles employees in any manner of those companies. Similarly, with on Business and Human Rights, in 2013 the Enel SpA Board this formal commitment, Enel explicitly becomes a promoter of Directors approved the Human Rights Policy, which was of the observance of such rights on the part of contractors, subsequently approved by all the subsidiaries of the Group. suppliers and business partners as part of its business rela- This policy sets out the commitments and responsibilities tionships. Implementation of the activities provided for in the in respect of human rights on the part of the employees of action plans, which were prepared following due diligence on Enel SpA and its subsidiaries, whether they be directors or the management system in 2017, continued in 2019. Values and pillars of corporate ethics 31 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements32 Relazione Finanziaria Annuale 20193. STRATEGY & RISK MANAGEMENT REPORT ON OPERATIONS Reference scenario Macroeconomic environment World economic growth in 2019 slowed markedly, confirming government intervened actively with a very accommodative the weakness that had emerged in the 2nd Half of 2018. The monetary and fiscal policy, which should allow the economy trade tensions between the United States and China, the tu- to normalize over the course of 2020. multuous geo-political environment and the persistent uncer- In Brazil, economic activity was weak in the first part of 2019 tainty linked to the Brexit negotiations curbed consumption due to the difficulties registered in industry and services, and investment. These factors were compounded by the slow while private consumption remained fairly resilient. Indicators pace of growth in China, which has stabilized at around 6%, for the real economy have reversed course, however, show- its lowest level in the last 30 years. ing a strong recovery in the last two quarters. The approval of pension reform has restored the confidence of firms and The United States continued its long expansion, displaying consumers and paved the way for the start of a new cycle of resilient domestic demand and a job market with unemploy- reforms in 2020. ment at historic lows (3.6%), as well as continuing real wage In Colombia, economic activity outperformed the entire area, growth of 3%. However, the restrictive monetary policy im- driven by private consumption and investment, despite the plemented by the Fed has adversely affected some sectors escalation of social unrest towards the end of the year. of the economy, such as real estate, which has experienced In Peru, expansionary financial conditions sustained domestic a sharp drop. In addition, manufacturing was hit hard by the demand; however, the shock in the primary sector in the first US-China trade war. part of the year impacted the economic recovery. Growth was modest in the euro area, averaging 0.2% on a The outbreak of the COVID-19 epidemic in China and the sub- quarterly basis. sequent spread of new infections in other parts of the world The weakness is mainly attributable to the decline in exports since the start of the year have radically altered the scenario and the crisis in the auto sector, which has been particular- for 2020. At this point, a strong global shock is expected both ly significant for Germany. Domestic demand in France and on the supply side (i.e. interruptions of the supply chain and Spain has been resilient, while economic activity has stagnat- production activities) and on the demand side (lower discre- ed in Germany and Italy. tionary consumption and investment due to the restrictions). Among the mature economies, the euro area is the most at In Latin America, economic conditions were weak and varied, risk, given the weight of manufacturing, discretionary con- affected by strong political instability. The deterioration in the sumption and exports in its economy and the strong links with global context, the slowdown in the Chinese economy and China in the supply chain. By virtue of the restrictive mea- the decline in commodity prices had a major impact on the sures adopted in many countries in the euro area, the proba- entire area. bility that it will enter a recession in the 3rd Quarter of 2020 Argentina is in recession and the uncertainty generated by is now becoming high. Italy is already in recession from the the new economic policies adopted by the Fernandez govern- 1st Quarter of 2020 and any further restrictions imposed by ment created concern about debt stability and the prospects the Government threaten to erode the economic outlook for for recovery. GDP contracted by 2.1% in 2019 and is expected the current year even further. Following the imposition of new to fall again in 2020. restrictions, Spain will also be sharply impacted, not only in The Chilean economy was shaken by the social uprisings last the services sector (e.g. tourism) and discretionary consump- October, which led to a sharp contraction in the real econ- tion but above all in manufacturing and other industry. Owing omy towards the end of the year, penalizing the currency to the weakness of their healthcare systems and the limited and slowing economic activity. Both the central bank and the scope to introduce expansionary fiscal measures to support 34 Consolidated Annual Report 2019demand (as well as their large debt exposure denominated in was also created, easing the constraints of the previous quan- foreign currencies), the emerging economies are now highly titative easing program and thus allowing the ECB to purchase vulnerable. more Italian public debt securities. At this juncture, the response of the central banks was rapid Governments around the world are also introducing major and coordinated. The Fed aggressively cut interest rates (in fiscal stimulus measures to counter the economic conse- two extraordinary sessions), bringing them to their neutral quences of restrictions imposed to combat the coronavirus value (from 1.50-1.75% to 0-0.25%). The Bank of England pandemic. The support of the European Commission and the lowered its official interest rate to 0.10% from 0.75%. The possibility of derogating from the constraints of the Stability response of the ECB was focused entirely on the problem Pact will allow the Italian government and those of other Eu- of liquidity: it therefore did not cut rates but did introduce a ropean countries to implement the necessary measures to massive monetary stimulus. First, it expanded its quantitative promote economic recovery in the 2nd Half of the year. easing program by €120 billion until the end of 2020, greater than expected, while at the same time more favorable con- In the coming months, a clearer picture of the economic con- ditions were granted for banks’ long-term refinancing opera- sequences of the epidemic and the impact on the financial tions. A €750 billion Pandemic Emergency Purchase Program markets will certainly emerge. GDP growth % Italy Spain Portugal Greece Argentina Romania Russia Brazil Chile Colombia Mexico Peru Canada United States South Africa 2019 0.3 2.0 2.2 1.9 -2.1 4.2 1.3 1.1 1.0 3.3 -0.1 2.2 1.6 2.3 0.2 2018 0.7 2.4 2.6 1.9 -2.4 4.5 2.2 1.3 4.0 2.5 2.1 4.0 2.0 2.9 0.8 Source: National statistical institutes and Enel based on data from ISTAT, INE, EUROSTAT, IMF, OECD and Global Insight. Reference scenario 35 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsAverage exchange rates Euro/US dollar Euro/British pound Euro/Swiss franc US dollar/Japanese yen US dollar/Canadian dollar US dollar/Australian dollar US dollar/Russian ruble US dollar/Argentine peso US dollar/Brazilian real US dollar/Chilean peso US dollar/Colombian peso US dollar/Peruvian nuevo sol US dollar/Mexican peso US dollar/Indian rupee US dollar/South African rand Inflation % Italy Spain Russia Romania India South Africa Argentina Brazil Chile Colombia Mexico Peru USA Canada 2019 1.119 0.88 1.11 109 1.33 1.44 62.99 48.17 3.94 702.85 3,280 3.34 19.25 70.42 14.45 2019 0.6 0.7 4.5 3.8 3.7 4.1 53.6 3.7 2.3 3.5 3.5 2.1 1.8 2.0 2018 1.181 0.89 1.15 110.45 1.30 1.34 67.15 28.05 3.65 641.81 2,956 3.29 19.23 68.40 13.24 Change -5.25% -1.12% -3.48% -1.31% 2.31% 7.46% -6.20% 71.73% 7.95% 9.51% 10.96% 1.52% 0.10% 2.95% 9.14% 2018 Change 1.1 1.7 2.9 4.6 3.9 4.6 33.8 3.7 2.3 3.2 3.2 1.3 2.4 2.2 -0.5 -1 1.6 -0.8 -0.2 -0.5 19.8 - - 0.3 0.3 0.8 -0.6 -0.2 The IBOR reform Interbank Offered Rates (IBORs) represent benchmarks for assessment of the impacts on the financial instruments subject most financial instruments marketed worldwide. to revision as well as on the organizational structures involved. Over the years there have been several cases of manipulation Note that management is aware of the associated risks and of these rates by banks, and for this reason regulators around for this reason these activities have been planned so as to the world have begun a reform of the IBORs to restore the complete the transition by the deadline set for 2021. reliability and soundness of these benchmarks. In view of the considerable uncertainty surrounding the timing of the reform in the transition phase, the Enel Group has launched an 36 Consolidated Annual Report 2019The energy industry Energy - commodity conditions Volatility returned to the oil market last year. Observing devel- opments in the price of Brent, we find alternating upward and downward price movements during 2019, with a peak above $71 a barrel in April, before falling below $60 a barrel in late summer. Despite the numerous events exerting downward pressure on the global oil supply (the sanctions imposed by the Trump administration on Iranian exports, the deterioration in the crisis in Venezuela and the attacks on infrastructure in Saudi Arabia), prices were lower than at the beginning of the year, indicating a structural weakness in global demand. The average API2 price of coal in 2019 fell by 34% compared with 2018. This trend is attributable to two main factors: 1) the drop in global demand and 2) supply cuts that were insufficient to rebalance the fundamentals. The rapid drop in coal demand in Europe (with a decline of about 20% in imports compared with a year earlier) was due both to a number of closures of capacity and a replacement effect between coal and gas due to the greater cost competitiveness of combined-cycle plants. On the supply side, Indonesia maintained its position as the main exporter (a year-on-year increase of 40 million metric tons), followed by Russia and Australia, while exports from Colombia and the United States decreased due to the decline in demand from Europe. During the past year, the weakening of Asian demand and new liquefaction capacity entering the market led to a surplus of LNG, which helped divert gas flows to Europe, first driving gas stocks to record levels and then causing a sharp drop in gas prices at all major European hubs. The average TTF gas price, for example, was €13.6/MWh, down 40% compared with a year earlier. Brent API2 TTF CO2 $/bbl $/t €/MWh €/t 2019 64 61 14 25 2018 72 92 23 16 Change -11.1% -33.7% -39.1% 56.3% After a 2018 characterized by constant growth, 2019 was in- stead afflicted by considerable volatility, which first saw the price of CO2 allowances fall below €20/ton in February and then rise to €30/ton in July. The combination of mild tem- The sharp decrease in gas prices combined with the rise in the price of CO2 has helped drive changes in the generation mix in some European countries, encouraging gas-fired gen- eration even in countries like Spain, where coal has historically peratures, uncertainty over Brexit negotiations and concerns represented the marginal generation technology. about possible risks associated with global macroeconomic growth strongly impacted market developments. Reference scenario 37 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsElectricity and natural gas markets Electricity demand Developments in electricity demand (1) GWh Italy Spain Romania Russia (2) Argentina Brazil Chile Colombia Peru (1) Gross of grid losses. (2) Europe/Urals. Source: Enel based on TSO figures. 2019 319,597 248,876 61,699 801,908 133,323 594,368 77,064 71,181 53,483 2018 321,910 253,495 62,044 805,916 137,262 583,025 76,175 69,176 50,836 Change -0.7% -1.8% -0.6% -0.5% -2.9% 1.9% 1.2% 2.9% 5.2% In 2019, electricity demand trended downwards: in Italy, de- creased sharply (-3%) in Argentina due to recession in the mand contracted by 0.7% compared with 2018, while Spain country, while all other countries in which Enel has a presence registered an even larger decline of 1.8%, reflecting weather posted increases in electricity demand: Brazil +1.9%, Chile developments. +1.2% and Colombia +2.9%. Among the Latin American countries, electricity demand de- Electricity prices Electricity prices Average baseload price 2019 (€/MWh) 52.3 47.5 Change in average baseload price 2019-2018 -14.6% -17.1% Average peakload price 2019 (€/MWh) 58.4 51.2 Change in average peakload price 2019-2018 -14.2% -16.8% Italy Spain 38 Consolidated Annual Report 2019Price developments in the main markets Eurocents/kWh Final market (residential) (1) Italy France Romania Spain Final market (industrial) (2) Italy France Romania Spain (1) Annual price net of taxes - annual consumption of between 2,500 kWh and 5,000 kWh. (2) Annual price net of taxes - annual consumption of between 70,000 MWh and 150,000 MWh. Source: Eurostat. 2019 2018 Change 0.2301 0.1765 0.1358 0.2403 0.1066 0.0704 0.0985 0.0943 0.2067 0.1754 0.1333 0.2383 0.0755 0.0686 0.0794 0.0880 11.3% 0.6% 1.9% 0.8% 41.2% 2.6% 24.1% 7.2% Natural gas markets Natural gas demand Millions of m3 Italy Spain 2019 72,947 34,215 2018 71,514 30,062 Change 1,433 4,153 2.0% 13.8% Last year saw demand for natural gas rise in Italy (+2.0%), while demand jumped sharply in Spain (+13.8%), mainly driven by electricity generation. Gas demand in Italy Millions of m3 Distribution grids Industry Thermal generation Other (1) Total 2019 31,650 14,002 25,775 1,520 72,947 2018 32,355 14,266 23,361 1,532 71,514 Change (705) (264) 2,414 (12) 1,433 -2.2% -1.9% 10.3% -0.8% 2.0% (1) Includes other consumption and losses. Source: Enel based on data from the Ministry for Economic Development and Snam Rete Gas. Observing the gas demand by sector, we see that the in- cent thanks to the steep decline in the VTP price, which made crease in Italy in 2019 is due exclusively to the thermal gen- combined-cycle generation especially competitive. eration sector, which registered an increase of over ten per Reference scenario 39 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsClimate change and long-term scenarios In the following pages, Enel sets out its strategy founded on ened in 2019: the target for the reduction of direct emissions decarbonization, innovation and digitalization, with a sharp focus on the fight against climate change. We describe an integrated business model directed at sustainable develop- ment. In order to promote transparency in our climate-change disclosures, we intend to give our stakeholders all the tools from generation by 2020, which was set in 2015 at 350 g/ kWheq of CO2 with a 25% reduction compared with 2007, was achieved one year earlier. In fact, 2019 closed with a reduc- tion of 37% compared with 2007, to 296 g/kWheq of CO2. This objective has been certified by the Science Based Targets ini- and information they need to appreciate how the Group is tiative (SBTi)(4) as consistent with the 2DS(5) scenario of the tackling climate change with diligence and determination. International Energy Agency, which defines an energy system Enel has therefore publicly committed itself to adopting the development path and an emission trajectory consistent with recommendations of the Task Force on Climate-related Fi- at least a 50% chance of limiting the average global tempera- nancial Disclosures (TCFD)(1) of the Financial Stability Board, ture rise to 2 °C. As a result, the reduction target for 2020 has which in June 2017 published specific recommendations for the voluntary reporting of the financial impact of climate risks. been updated in the new 2020-2022 Strategic Plan to 254 g/ kWheq of CO2. The Group is also taking on board the “Guidelines on report- ing climate-related information” published by the European In September 2019, Enel further enhanced its commitment Commission in June 2019, which, together with the TCFD rec- ommendations and the GRI standard(2), constituted the main benchmark framework for the Group’s reporting on climate by setting a new target for 2030, with which it undertook to reduce direct CO2 emissions per kWh by 70% by 2030 (Scope 1) compared with 2017. This target, for direct emissions from change issues in 2019. electricity generation, is nearly three times as ambitious as the previous objective for 2020 and is fully aligned with the The Enel Group is committed to developing a business model Paris Agreement (COP21). In addition, the objective has been that is consistent with the objectives of the Paris Agreement certified by the Science Based Targets initiative, which is cur- (COP21)(3) to contain the average increase in global tempera- rently the most ambitious certification criterion available for ture below 2 °C compared with pre-industrial levels and to the utility sector and is consistent with the Well Below 2C continue to limit this rise to 1.5 °C. In 2019 Enel officially reaf- pathway of the SBTi and the IEA B2DS scenario. This accel- firmed this commitment, responding to the call for action by eration is also a response to the appeal of the Intergovern- the United Nations and being the only Italian company to sign mental Panel on Climate Change (IPCC) as part of its effort to the commitment to limit the increase in global temperatures strengthen the global response to the climate change threat. to 1.5 °C and to achieve zero emissions by 2050. Included in the special report, the appeal warns of the impacts The Group’s ambition for leadership in the energy transition of global warming of 1.5 °C above pre-industrial levels and the and the fight against climate change was further strength- related global greenhouse gas emission pathways. (1) The TCFD is the task force established by the Financial Stability Board in December 2015 to develop voluntary guidelines and recommendations for companies in order to provide information to all stakeholders on the risks and opportunities associated with climate change. (2) The Global Reporting Initiative is an independent international organization that develops global reporting standards for sustainability. (3) The agreement reached in December 2015 at the 21st meeting of the Conference of the Parties (COP21) incorporates a commitment to limit the increase global temperature to below 2 °C and – if possible – below 1.5 °C compared with pre-industrial levels. (4) An initiative to provide companies with targets for reducing greenhouse gas emissions (GHG) consistent with what the current level of scientific knowledge deems necessary for limiting the rise in global temperature well below of 2 °C. (5) The 2DS scenario describes an energy system consistent with an emissions trajectory which, with an 80% probability, would make it possible to limit the increase in the average global temperature to no more than 2 °C. 40 Consolidated Annual Report 2019Scope 1 (1) (g CO2/kWheq) Scope 1 (1) (g CO2/kWheq) 465 465 411 411 369 369 -70% -70% 296 296 254 254 FULL decarbonization by 2050 FULL decarbonization by 2050 125 125 2007 2017 2018 2019 2020 2030(3) 2030(3) 2050 2007 2017 2018 Previous 2020 target(2) 2019 350 2020 Target achieved 2030(3) 2030(3) 2050 1. Includes only direct emissions due to power generation. Other direct emissions are not included in the deﬁnition of the target as they are marginal and meet the exclusion criterion of the SBTi methodology that sets a margin of 5% of total Scope 1 and Scope 2 emissions. 2. Scope 1 emissions by 2020, in line with IEA 2DS scenario. 3. Scope 1 emissions by 2030, in line with Well Below 2C path of the Science Based Targets initiative and the IEA B2DS scenario. CO2 emissions reduced 1. Includes only direct emissions due to power generation. Other direct emissions are not included in the deﬁnition of the target as they are marginal and meet by 70% by 2030 compared with 2017. Previous 2020 target(2) 350 Target achieved the exclusion criterion of the SBTi methodology that sets a margin of 5% of total Scope 1 and Scope 2 emissions. 2. Scope 1 emissions by 2020, in line with IEA 2DS scenario. 3. Scope 1 emissions by 2030, in line with Well Below 2C path of the Science Based Targets initiative and the IEA B2DS scenario. CO2 emissions reduced In parallel with direct emissions, the Group has set a new tion of gas by the Group’s end users (indirect emissions from by 70% by 2030 compared with 2017. target, also certified by the Science Based Targets initiative, to the use of products sold), which represent a significant source also reduce indirect emissions associated with the consump- Scope 3 gas retail(1) (Mton CO2) Scope 3 gas retail(1) (Mton CO2) 25.3 25.4 25.3 25.4 of indirect Scope 3 emissions, by 16% by 2030. -16% -16% 23.9 23.9 21.2 21.2 2017 2018 2019 2030 1. Scope 3 emissions connected with sale of gas on retail market by 2030 in line with 2C path of the Science Based Targets initiative. 2017 2018 2019 2030 1. Scope 3 emissions connected with sale of gas on retail market by 2030 in line with 2C path of the Science Based Targets initiative. The Group develops short-, medium- and long-term scenari- wards a green economy characterized by ever lower emis- os for the energy industry and for macroeconomic and finan- sion levels. cial conditions in order to support its strategic and industrial planning and the evaluation of investments and extraordinary The issues connected with future trends in climate variables corporate transactions. The role of climate change in these (in terms of acute and chronic phenomena) define the so- scenarios is increasingly important in terms of: called “physical scenario”, while the issues associated with > acute phenomena (heat waves, flooding, hurricanes etc.) and their potential impact on industrial assets; > chronic phenomena related to structural changes in the cli- the industrial and economic transition towards solutions to reduce atmospheric concentrations of CO2 are the charac- teristic elements of the “transition scenario”. The adoption of mate, such as the rising trend in temperatures, rising sea these scenarios and their integration into corporate processes levels etc., which bring about changes in the output of gen- takes account of the guidelines of the TCFD and enables the eration plants and in electricity consumption profiles in the assessment of the risks and opportunities connected with cli- residential and commercial sectors; mate change. > transition of the various industrial and business sectors to- Reference scenario 41 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements The physical climate scenario Among the climate projections developed by the Intergovern- mental Panel on Climate Change (IPCC)(6) on a global scale, the Group has selected two representing a specific level of emissions (the so-called “Representative Concentration Path- way”): > Representative Concentration Pathway 2.6 (RCP 2.6): compatible with global warming of less than +2 °C above pre-industrial levels by 2100, or an average of about +1 °C in 2081-2100; > Representative Concentration Pathway 8.5 (RCP 8.5): compatible with a scenario where no particular measures are taken to combat climate change, a so-called “business as usual scenario”. In this scenario, a mean global tempera- ture increase of about 4.3 °C above pre-industrial levels is forecast for 2081-2100. In the RPC 8.5 climate projections, the Mediterranean and Central/South America will experience a significant increase in average temperatures and a substantial decline in precip- itation, with the effects becoming more pronounced in the second half of the century and the impact increasing up to 2100. In the RCP 2.6 scenario, the effects will be similar but Italy Acute phenomena: in the 2030-2050 period, heat waves are expected to increase appreciably both in terms of frequen- cy and geographical distribution, especially in the southern regions of the country. In these scenarios, the intensity of extreme rain and snowfall events increases sharply, but their frequency declines compared with historic trends. Chronic phenomena: the average annual temperature is expect- ed to increase over the 2030-2050 period in both the RCP 2.6 and 8.5 scenarios. In the RCP 8.5 scenario, the temperature is expected to rise by an average of 0.4 °C compared with the RCP 2.6 scenario in the 2030-2050 period, with the differential then widening significantly in the second half of the century. Chron- ic changes in temperature can be analyzed to obtain information on the potential effects on cooling and heating demand in local energy systems. In terms of heating days (HDs), i.e. days with a temperature below 15 °C, and cooling days (CDs), or days with a temperature above 24 °C, the 2030-2050 period will see HDs decrease by 14% and CDs increase by 60% in the RCP 2.6 sce- nario, while the RCP 8.5 scenario will see a larger decline in HDs (-17%) and a larger increase in CDs (+80%). less intense, with the trend slowing in the second half of the century, thereby producing a substantial differential between RCP 2.6 the two scenarios in 2100. The scenarios are global in nature. Accordingly, in order to de- termine their effects in the areas of relevance for the Group, a collaborative initiative has been started with the Earth Sci- RCP 8.5 ences department of the International Center for Theoretical Physics (ICTP) of Trieste. As part of this collaboration, the ICTP provides projections for the major climate variables with a grid resolution of 50 km2 and a forecast horizon running from 2030 to 2050. The main variables are average tempera- tures, rainfall and snowfall and solar radiation. The first phase of the study conducted in 2019 involved Italy and Spain, with the consequent definition of a preliminary physical scenario. Heating days (HD) Cooling days (CD) -14% -17% 60% 80% (6) The IPCC, founded in 1988 by the UNEP (United Nations Environment Program) and the WMO (World Meteorological Organization), is the main international body for the assessment of climate change. The IPCC provides science-based climate analysis in order to support governments in developing policies to combat climate change. 42 Consolidated Annual Report 2019Spain Acute phenomena: over the 2030-2050 period, heat waves are expected to increase appreciably in frequency, with their geographical spread expected to expand, especially in the southern area of the country. Extreme rainfall will increase in intensity but its frequency will decline. At the same time, extreme snowfalls will largely remain located in the current geographical areas but their frequency and intensity could de- cline sharply. Chronic phenomena: the average annual temperature is ex- pected to increase over the 2030-2050 period in both the RCP 2.6 and 8.5 scenarios. In the RCP 8.5 scenario, the tempera- ture is expected to rise by an average of 0.4 °C compared with the RCP 2.6 scenario in the 2030-2050 period, with the dif- ferential then widening significantly in the second half of the century. In terms of heating days (HDs) and cooling days (CDs) the 2030-2050 period will see HDs decrease by 6% and CDs increase by 29% in the RCP 2.6 scenario, while the RCP 8.5 scenario will see a larger decline in HDs (-10%) and a larger increase in CDs (+43%). RCP 2.6 29% -6% -10% 43% RCP 8.5 Heating days (HD) Cooling days (CD) The transition scenario The transition scenario depicts the evolution of industrial and business sectors in an economic, social and regulatory con- text consistent with different trends in greenhouse gas (GHG) emissions and, therefore, is correlated with the RCP 2.6 and 8.5 climate scenarios. The Group has therefore equipped it- self with quantitative tools that incorporate assumptions re- garding the context to produce corresponding projections for energy demand, electricity demand, electricity production, the penetration of renewables and electric vehicles, etc.: in short, all the variables that characterize a national energy sys- tem relevant to the Group’s activities. In defining the transition scenarios, we distinguish between: > assumptions concerning the global macroeconomic and energy context in terms of commodity prices, interest rates, gross domestic product etc., using international benchmarks produced by entities such as the Internation- al Energy Agency (IEA), Bloomberg New Energy Finance (BNEF), International Institute for Applied Systems Analy- sis (IIASA), etc. With regard to IIASA, for example, consid- eration was given to the fundamentals driving the “Shared Socioeconomic Pathways” (SSPs), in which general ener- gy scenarios related to physical climatic scenarios are de- veloped. The information deriving from the “SSPs” is used to support long-term forecasts on commodity prices; > assumptions concerning local policies and regulatory mea- sures associated with the fight against climate change, such as the reduction of carbon dioxide emissions, the ef- ficiency of the energy system, the decarbonization of the electricity sector, the reduction of oil consumption etc. For Italy and Spain, reference is made to those countries’ inte- grated National Energy and Climate Plans (NECPs), which are also approved at the European level, while outside Eu- rope, reference is made to the respective national energy programs of the countries involved. In order to define the transition scenario for the electricity sector, the Group considers the elements described above (physical scenarios, assumptions about the macro and ener- gy context, regulatory developments) as prerequisites for the assessment of future projections of electricity demand, elec- tricity generation, renewables etc. In this context, the effect of temperature on electricity de- mand in the long term (2030-2050) has been estimated. Italian electricity demand is provisionally forecast to increase on av- erage by up to 5%, due to the combined effect of the chronic increase in temperature and the transition of the system to- wards greater electrification of energy consumption. Reference scenario 43 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsPhysical scenario Transition scenario Temperature Macro Precipitation Commodities Wind Regulatory Irradiation Technological evolution Energy System Model Moreover, in the RCP 8.5 physical scenario the probability of extremely hot years increases, leading to a future increase of up to 10% in electricity demand, together with the risks associated with more frequent extreme weather events. In the case of Spain, however, over the same time horizon the chronic effects would involve an average increase in demand of around 2% and, in the possible peak year of the RCP 8.5 scenario, it could reach 4%. The smaller increase in electricity demand in Spain compared with Italy mainly reflects the nar- rower scope for the future electrification of consumption, as it is currently already largely electrified as a consequence of the presence of nuclear power in the country. These effects only reflect the long-term impact of temperature on electricity de- mand and the inertial evolution of the national energy system. They do not consider the repercussions of climate change on economies underscored in the IPCC’s special report on global warming, which could also have indirect effects on economies and, therefore, on electricity demand. Effects on energy demand (2030-2050) Italy RCP 2.6 RCP 8.5 Spain RCP 2.6 RCP 8.5 ～+5% ～7% ～3% Up to +10% ～+2% ～ 2% ～2% Up to +4% Δ peak year Average 44 Consolidated Annual Report 2019Group strategy The determination of the Group’s strategy is based on many > strategic dialogue: a rolling process where key strategic factors, beginning with an evaluation of the external environ- issues are discussed separately from the typical strategic ment. In particular, the following analyses are performed: planning process, which in turn is enriched by the con- > an analysis of macroeconomic, energy and climate scenar- tinuous feedback of the strategic dialogue. It is part of a ios: assessments and projections at the global and local strategic design phase where communication between levels to identify the main macroeconomic, energy and cli- executives in the different businesses produces valuable mate drivers in the short, medium and long term; insight for the development of new strategic options, un- > competitive landscape analysis: a comparison of the eco- derscoring the need for cultural or organizational change nomic, financial, industrial, ESG (Environmental, Social & and synergies between businesses; Governance) performance of companies in the utilities sec- > assessment of ESG factors and results of materiality analy- tor and other industries (for example, automotive, tech, oil sis: Enel conducts materiality analysis using a well accept- & gas) in order to monitor, shape and support the Group’s ed methodology, taking account of the main standards in competitive advantage and leadership position; this area (Global Reporting Initiative - GRI and the Sustain- > industrial vision: an overview of the macro-trends affecting ability Accounting Standards Board - SASB) with the aim of the company’s business, with an assessment of the po- identifying the most important issues for both the Compa- tential impacts on the Group’s business based on a broad ny and for stakeholders (material issues) and to verify their internal and external collaborative effort to identify actions “alignment” or “misalignment” with external expectations to prevent, adapt to and manage disruption and changes in and internal importance. our business. The strategy of the Enel Group has proven its ability to create The analysis of what is happening and what could happen in sustainable long-term value, integrating the themes of sus- the external environment underpins the phase of designing tainability and close attention to climate change issues while our strategic options and consequent positioning, which is simultaneously ensuring a steady increase in profitability. structured into the following main activities: The Group is among the leaders guiding the energy transi- > long-term positioning: evaluation of strategic options over tion through the decarbonization of electricity generation and a time horizon that extends beyond that used in industri- the electrification of energy consumption, which represent al planning, with (i) the definition and the quantitative and opportunities both to increase value creation and to contrib- qualitative development of alternative macroeconomic, en- ute positively to more rapid achievement of the Sustainable ergy and climate scenarios against which overall strategy Development Goals set by the United National (SDGs) in the can be assessed, and (ii) analysis based on stress testing 2030 Agenda. for various factors, including the evolution of the industrial sector, technology, competitive structure and policies; Group strategy 45 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsStrategic Plan The new 2020-2022 Strategic Plan confirms this approach, ex- > Industry, Innovation and Infrastructure (SDG 9); plicitly integrating the SDGs into our financial strategy. > Sustainable Cities and Communities (SDG 11); By promoting a sustainable business model and behavior, the > Climate Action (SDG 13). Enel Group has the ambition to contribute to the achievement of all the SDGs, leveraging SDG 17 (Strengthen the means of The purpose-driven strategic pillars of the new Plan represent implementation and revitalize the global partnership for sus- the main industry trends and enabling factors connected with tainable development) to foster global partnerships to tackle the energy transition and the achievement of the SDGs. the many challenges faced by the world today. The trends in decarbonization and electrification, which are More specifically, the investment plan is aimed directly at four naturally connected with the generation and sale of electrici- main SDGs that will account for more than 90% of the Group’s ty, will be enabled by the development of increasingly digital total investment in 2020-2022, equal to a total of €28.7 billion: grids and the evolution towards a platform-based business > Affordable and Clean Energy (SDG 7); model and operational approach. The pillars of the 2020-2022 Strategic Plan I N O T A V O N N I 46 Consolidated Annual Report 2019Decarbonization In terms of decarbonization, in a configuration of the scenar- io(7) consistent with limiting global warming within the levels established with the Paris Agreement, installed renewable capacity should increase from 35% in 2018 to 69% in 2040 thanks to the progressive decline in production costs and to the increased public awareness of climate issues. This evolu- tion of the system towards more variable sources will require greater flexibility to manage the balance between generation and consumption. Accordingly, demand response and storage technologies are also expected to grow significantly, also in this case boosted by a steep decline in costs, which are ex- pected to halve over the next 20 years. The global context - Decarbonization Global installed capacity Flexibility (GW) 65% 35% 2018 7.2 31% 69% 2040 15.5 Renewable capacity (TW) Renewable capacity Conventional capacity +251% 200 145 57 2020 2030 2040 Storage (GW) +4,280% 1,095 346 25 2020 2030 2040 (7) Sustainable Development Scenario IEA (International Energy Agency), Word Energy Outlook 2019. Group strategy 47 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsIn order to respond more effectively to the challenges posed fore be achieved thanks to an acceleration of renewables by the rapid growth of renewable energy, enabling the Group development as well as the progressive decommissioning of to effectively supplement and accelerate the evolution of coal-fired plants. The objective is to achieve an entirely mar- thermal generation, a common structure and management ginal level of coal generation by 2030, with a 74% decrease in team have been created for all power generation. production as soon as 2022. The major decarbonization objectives of the plan will there- Progressive decrease in coal generation Coal-fired generation TWh Coal capacity GW -74% 37.6 -58% 11.7 16.9 6.6 2019 2022 2019 2022 25.7% 16.4% 6.8% Coal in total generation % The target for increasing renewable capacity is expected to > 3.6 GW will be developed to support our presence in re- rise by 14.1 GW in 2020-2022 and will be achieved through a cently opened market or in entirely new markets, both di- number of strategic lines of development: rectly and through joint ventures. > 5.4 GW will be developed in countries such as Italy, Spain Thanks to these initiatives, 60% of the Group’s total installed and Chile, where new investments in renewable energy capacity in 2022 will be renewable. will support the decarbonization of our generation fleet; In order to support the decarbonization process, the plan also > 5.1 GW will mainly be developed in Brazil and the United envisages a significant contribution from the new flexibility States, where an increasing number of large customers services provided by Enel X. Demand response capacity will are moving from the regulated market to purchase elec- expand from 6.3 GW in 2019 to over 10.1 GW in 2022, while tricity from renewable sources primarily through long- storage services will increase from the current 110 MW to term power purchase agreements (PPA); about 440 MW in 2022. 48 Consolidated Annual Report 2019201864.4201815.8Electrification Electrification which means the substitution of electricity for other commodities in energy consumption will play a central role in the Enel Group strategy. In line with the IEA(8) sustainable development scenario, the share of electricity in final global energy consumption should reach 43% in 2040 (from 24% in 2018). This scenario assumes a significant increase in the average annual investment for end use, which in 2030-2040 should be almost 5 times that in 2018. The opportunities deriving from this trend will involve a broad spectrum of activities, ranging from distributed generation to energy efficiency upgrading for buildings and electric vehicle infrastructure, thus supporting the growth of companies that move first. Enel’s plan seeks to achieve a stable market share in the free markets of European countries, supported by a 65% increase in the number of customers and 21% growth in volumes sold on the free market in 2022, mainly following the elimination of regulated rates in Italy, which is currently scheduled to oc- cur at the start of 2022. In South American countries such as Brazil, Enel is already benefiting from the gradual opening of the market with long-term contracts with existing customers. Further impetus to the electrification process will come from electric mobility, with the installation of about 736,000 re- charging points by 2022, and more generally from the new services offered by Enel X. The global context - Electrification Electricity consumption as percentage of total energy consumption Annual investment (USD trillion) Electricity consumption 57% Other 43% 2040 76% 24% 2018 +375% 1.0 1.9 2018 2019-2030 2031-2040 (8) Sustainable Development Scenario IEA (International Energy Agency), Word Energy Outlook 2019. Group strategy 49 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements0.4Enablers In order to adequately support value creation from these two macro trends, the plan identifies distribution grids as one of the main enablers. The evolution of the role of distributors will be a key factor in supporting the greater complexity involved with distributed renewable generation and electric mobility, in managing the digitalization process driven by innovative ser- vices offered to customers and in ensuring the resilience of the energy system in view of the impacts of climate change. Enel’s goal is to make grids more resilient and flexible and im- prove service quality. The average system interruption frequen- cy rate is expected to decrease by 9% in three years, with a simultaneous efficiency drive that will decrease opex per cus- tomer by 17% in the same period. The plan provides for the number of Smart 2.0 meters to more than double, from 13.1 million to 28.8 million. Evolution of the main distribution KPIs Digitalization Smart meters 2.0 (mln) Service quality SAIFI (no.) Efficiency Opex/Customer (€) >2x 28.8 2022 -9% 2.9 2022 -17% 35.6 2022 50 Consolidated Annual Report 201913.1201920193.2201942.9In parallel, the Group will invest around €2.5 billion over the three- On the retail end, Enel will build its operating model around prod- year period in platforms, mainly linked to the evolution of grids, ucts and services, rather than local markets. The global platform the market and Enel X. The Group’s strategy is based on the op- will enable the standardization of back-end and front-end pro- portunity to reap the benefits of the platformization of its busi- cesses and systems and the development of global products. ness operations or new business models. Enel X is a business model that was conceived as a platform by For grids, a global platform means standardizing operations and design, where innovative products and services are developed maintenance, customer management processes and the alloca- and delivered globally to our customers. This represents an op- tion of resources and systems, enabling global optimization and portunity for rapid scalability. convergence towards a plug & play model that can be exported when new grids are acquired. Group strategy 51 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsThe new Strategic Plan, which is focused on sustainable busi- persistent economic instability, by around €0.9 billion. Owing nesses, incorporates a substantial improvement in our risk in part to the new growth scenarios for energy volumes in the profile, consistent with the “sustainability = value” strategic South American countries, these developments are associat- paradigm. ed with the benefit of volumes already contracted or related Thanks to the measures launched to progressively reduce to regulated markets. In absolute terms, over the 2020-2022 coal-fired generation, the decarbonization strategy is expect- period some 80% of the cumulative €58 billion of EBITDA ed to reduce EBITDA at risk by about €0.5 billion over the will be generated by regulated or already contracted activ- 2020-2022 horizon of the plan. At the same time, the plan ities, and therefore only 20% is exposed to merchant risk. has revised the contribution of Argentina, which is afflicted by Distribution Retail Enel X Global Activities Asset Owner Asset Operator Customer Management Front End Pruducts Customers Prosumers Digital Layer Digital Layer Digital Layer Physical Assets Buy Sell Back End Standardized Back Office Suppliers & Partners Cities Assets (e.g. Charging Stations) 52 Consolidated Annual Report 2019With regard to the expected growth in renewable capacity generation. The risk associated with possible developments (equal to 14.1 GW), while the gap to the target is just 5.3 in the prices of commodities connected with thermal gen- GW, we can count on the existing pipeline of about 20 GW eration is in fact greater than that associated with variance for the 2020-2022 period. Furthermore, about 60% of cumu- of renewable sources, while Enel can also count on natural lative generation is already secured, with prices in line with geographic hedging. plan assumptions, while the retail customer base will natu- To pursue our strategic objectives, organic investment will rally hedge the remaining 40%. In addition, the progressive increase by 11% compared with the previous plan, raising increase in renewable generation will produce a correspond- EBITDA by 13% to €20.1 billion in 2022. ing reduction in the level of risk associated with electricity Distribution Retail Enel X Global Activities Asset Owner Asset Customer Operator Management Front End Pruducts Customers Prosumers Digital Layer Digital Layer Digital Layer Physical Assets Buy Sell Back End Standardized Back Office Suppliers & Partners Cities Assets (e.g. Charging Stations) Group strategy 53 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsThanks to the strategies it is deploying, the Group will be confirms the potential inherent in the Group’s sustainability able to achieve ordinary low carbon EBITDA of €18.3 billion strategy, in this case lowering the cost of debt. in 2022, which will bring the contribution of low-carbon prod- Together with improved operating performance, the ongoing ucts, services and technologies to 91% of the total. Over the effort in managing finance operations and the simplification course of the plan, in line with the EBITDA targets, more than of Enel’s structure will generate a 27% increase in net in- 90% of capital expenditure will be allocated for low-carbon come. And debt will increase by just 3% despite the expan- products, services and technologies. sion of investment. The strategy set out in the 2020-2022 plan is therefore based The progressive de-risking of our activities and the significant on the belief that the accurate and timely assessment of the visibility of profits give us the confidence to confirm not only main trends performed by the Enel Group is crucial for en- our three-year guaranteed minimum dividend per share policy, suring sustainability and growth into the future. One exam- but also to establish a new minimum guaranteed dividend per ple of this is the Enel Group’s recent placement of the first share of €0.40 in 2022, confirming the soundness of Enel’s sus- bond linked to achievement of the SDGs. This bond, which tainable strategy, which will produce an average growth rate for was placed at a lower cost compared with an ordinary issue, profits and dividends of over 8.0% in 2019-2022. Group's key financial targets Organic capex (€bn) EBITDA (€bn) Net income (€bn) +11% 28.7 +12% 20.1 +27% Net debt (€bn) +4.7% 47.3 2020-22 2022 6.1 2022 2022 54 Consolidated Annual Report 201925.92019-2117.920194.8201945.22019The Group has also created the following indicator of develop- following SDGs: 2.5 million beneficiaries of quality education ments in the energy transition. in 2015-2030 (SDG 4); 10 million beneficiaries of clean and Many of these indicators contribute to the achievement of accessible energy in 2015-2030 (SDG 7.1); 8 million benefi- SDG 13. ciaries of decent work and lasting, inclusive and sustainable The Group is fully convinced that climate change can still be economic growth in 2015-2030 (SDG 8). limited. The energy transition is well advanced, and to date all People centricity is one of the pillars of Enel’s sustainability stakeholders are involved in the shared challenge of decar- strategy. We pay great attention to our people, setting spe- bonizing the sector. With the steady progress in the transition cific objectives designed to strengthen their roles and skills from fossil fuels to renewable energy, the electrification of and provide the tools for managing the energy transition, with the economy and energy consumption will continue to accel- clear and precise goals in terms of performance assessments erate. This will generate sustained growth in demand in the and business climate. We work to promote upskilling and re- medium and long term, ensuring that society has cleaner and skilling programs aimed at supporting the energy transition as more accessible energy. well as the development of digital skills, pursuing the goal of The Group continues to promote the economic and social involving 100% of personnel in training devoted to this theme. growth of the local communities in which it operates, con- The Group also aims to promote diversity by having 50% fe- firming and strengthening its specific commitments for the male participation in selection processes by 2022. Main non-financial indicators 2022 Principali indicatori non finanziari 2022 60% Renewable capacity as % of total capacity(1) 220 g/kWheq CO2 emissions per kWheq generated a l P o b G l o n w er Generatio Distribution grid users 75 mln Smart meters 2.0 28.8 mln G l o b a l & I n N f r e a t w o s tru s rk cture al b o l G T r a d i n g E n e l X Retail Retail free-market customers(2) 35 mln 10.1 GW Demand response capacity managed 736 k Electric mobility charging points (1) Including nuclear. (2) Power & Gas. Group strategy 55 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements The management of decarbonization and people as well as reduction of atmospheric emissions and consumption and the communities is consistent with the “just transition” commit- promotion of biodiversity. ment promoted by the United Nations and signed by Enel’s Finally, technological transformation cannot be divorced from CEO in July 2019. serious concerns about cyber security, where the Group con- Clear objectives have also been set for increasing attention firms its objectives for disseminating cutting-edge solutions to workplace health and safety, to promoting a sustainable supported by associated verification measures (ethical hack- supply chain, to forging an increasingly integrated governance ing, vulnerability assessment, etc.), and fostering an effective structure and to managing environmental impact through the IT security culture. Assessment of the risks and opportunities connected with the Strategic Plan The process of defining the Group’s strategies is accompa- risk models of the Strategic Plan presented at the end of 2018. nied by an accurate analysis of the risks and opportunities Focusing on the stochastic risk analysis for the Strategic Plan, connected with those strategies. exchange rates and the volatility of energy and commodity pric- Identifying those risks and opportunities within the Enel es represent almost all the volatility of the drivers. In particular, Group’s strategic and industrial planning process is designed in addition to the dollar the most impacting currencies are the to span the horizon of the Plan in an integrated manner. Argentine peso, the Colombian peso and the Brazilian real. Although the strategy underlying the Plan, as described Nevertheless, the Group’s very structure ensures that the vol- above, envisages a phase of careful analysis and verification atility of the South American currencies has only a negligible of the strategic risk factors and variables, it retains scenario impact on net income, as demonstrated in the presentation at assumptions regarding future events that will not necessarily the Capital Markets Day. Italy and Spain represent more than occur, as they depend on variables that cannot be controlled half of the Group’s risk in terms of the impact of the volatility by management. Upside and downside developments may of energy prices and commodity price fluctuations on margins. occur as time unfolds. Examining the other risk factors, we can see that geographi- Before being able to approve the Strategic Plan, a quantita- cal diversification significantly reduces the exposure to the risk tive analysis of the risks and opportunities associated with the associated with renewable resources – a highly positive factor Group’s strategic positioning is presented annually to the Con- considering the Group’s positioning and the steady expansion of trol and Risk Committee appointed by the Board of Directors. renewable generation – while macroeconomic risks such as infla- In particular, risk factors such as exchange rates, inflation, pric- tion and electricity demand are less significant than the others. es and volumes, regulatory developments, industrial growth, In general, the Group can rely on a number of implicit correla- customer portfolio and efficiency, weather and climate events tions between risk factors to create diversification effects that and risks connected with the competition are identified. significantly mitigate total exposures. These include our geo- Based on the nature of the risk and opportunity drivers, the graphical diversification, or developments in exchange rates analytical approach that best represents their volatility is se- and inflation rates, or those in commodity prices and their im- lected. In practice, we perform probabilistic analysis for all pact on generation costs and revenue. those variables whose market time series provide a robust With regard to the risk factors estimated deterministically, foundation to estimate levels of correlation and representative note: volatility for future risk, and a deterministic analysis(9) based > the monitoring of all possible regulatory issues, including on what-ifs and expert judgments of the possible evolution those connected with climate legislation, is crucial for as- of the business with respect to the main risk factors for the sessing any upside or downside impact on the Group; execution of the Business Plan. > the estimates based on stress testing of the drivers of in- The validity of the results is also monitored with ex-post anal- dustrial growth (mainly renewables and grids); yses by risk cluster. In 2019, most of the actual upside and > the estimates of the impact of not achieving the customer downside events fell well within the limits estimated by the portfolio (retail markets and Enel X). (9) Stochastic analysis conducted with the Monte Carlo method. 56 Consolidated Annual Report 2019Risk management Due to the nature of its business, the Group is exposed to a at all levels of the Group are made in an informed manner variety of risks, notably financial risks, industrial and environ- consistent with the associated risks (including those connect- mental risks, strategic risk connected with the evolution of ed with climate change). To this end, the Board draws on the markets and risks connected with sustainability and climate expertise of the Control and Risk Committee, which issues change. prior opinions on a variety of matters, including the guidelines In order to effectively deal with such risks, Enel has adopt- of the ICRMS. ed an internal control and risk management system (ICRMS). The Group also has specific internal committees composed of This system is the set of rules, procedures, and organizational senior management personnel that are responsible for govern- structures aimed at identifying, measuring, monitoring and ing and overseeing risk management, monitoring and control. managing the main risks applicable to the Group. The Board of Directors performs a policy-setting role and is The following discusses the main types of risks and opportu- committed to developing guidelines to ensure that decisions nities facing the Group. Strategic risks connected with the market and the competitive environment The markets and businesses in which the Group operates are ergy vector, competition driven by contiguous sectors is also exposed to steadily growing competition and evolution, from rising, although this offers utilities the opportunity to move both a technological and regulatory point of view, with the tim- into new businesses. ing of these developments varying from country to country. The Group constantly monitors developments in the competi- As a result of these processes, Enel is exposed to growing tive environment and the market in order to tailor its strategic competitive pressure and, as electricity is this century’s en- development to this evolution. Regulatory risks The Group operates in regulated markets and changes in the tors, Enel has intensified its relationships with local gover- operating rules of the various systems, as well as the pre- nance and regulatory bodies, adopting a transparent, collab- scriptions and obligations characterizing them, impact the op- orative and proactive approach in addressing and eliminating erations and performance of the holding company. sources of instability in the regulatory framework. In order to manage the risks associated with regulatory fac- Country risk The Group has a major international presence, with some crises that may impact the continuity of the supply of ma- 50% of its revenue being generated abroad in a variety of terials or commodities, migratory flows or economic activity currencies. In addition to changes in global macroeconomic are also considered given that the impacts depend so closely and financial conditions, cash flows and corporate assets are on economic, social and even energy conditions in individual also exposed to idiosyncratic risk factors, such as exchange countries. rate volatility and changes in the economic, political, social For a detailed analysis of this class of risk, please see the and financial conditions in the various countries in which Enel section “Reference scenario”. operates. Global risks associated with pandemics or other Risk management 57 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsFinancial risks As part of its operations, Enel is exposed to a variety of finan- agement, monitoring and control processes, ensuring compli- cial risks that, if not appropriately mitigated, can directly impact ance with the principle of organizational separation of units re- our performance. These include commodity risk, exchange rate sponsible for operations and those in charge of monitoring and risk, interest rate risk, credit risk and liquidity risk. managing risk. The financial risk governance arrangements adopted by Enel The financial risk governance system also defines a system of establish specific internal committees, composed of top man- operating limits at the Group and individual Region, Country agement and chaired by the Chief Executive Officers of the and Global Business Line levels for each risk, which are moni- companies involved (including Enel SpA), which are responsi- tored periodically by risk management units. For the Group, the ble for policy setting and supervision of risk management, as system of limits constitutes a decision-making tool to achieve well as the definition and application of specific policies at the its objectives. Group and individual Region, Country and Global Business Line For further information on the management of financial risks, levels that establish the roles and responsibilities for risk man- please see note 44 of the consolidated financial statements. Enel operates in energy markets and for this reason is exposed to changes in the prices of fuel and electricity, which can have a significant impact on its results if not managed effectively. To mitigate this exposure, the Group has developed a strategy of stabilizing margins by contracting for supplies of fuel and the delivery of electricity to end users or wholesalers in advance. Enel has also implemented a formal procedure that provides for the measurement of the residual commodity risk, the specification of a ceiling for maximum acceptable risk and the implementation of a hedging strategy using derivatives on regulated markets and over-the-counter (OTC) markets. The commodity risk management process allows us to limit the impact on margins of unexpected changes in market prices and, at the same time, provides an adequate degree of flexibility to enable use to seize short-term opportunities. In order to mitigate the risk of interruption of fuel supplies, the Group has developed a strategy of diversification of supply sources, using suppliers located in different geographical areas. In view of the geographical diversification of access to international markets for the issuance of debt instruments and transactions in commodities, Group companies are exposed to the risk that changes in exchange rates between the currency of account and other currencies could generate unexpected changes in the performance and financial position aggregates in their respective financial statements. Given the current structure of Enel, the exposure to exchange rate risk is mainly linked to the US dollar and is attributable to: > cash flows in respect of the purchase or sale of fuel or electricity; > cash flows in respect of investments, dividends from foreign subsidiaries or the purchase or sale of equity investments; > cash flows connected with commercial relationships; > financial assets and liabilities. The Group’s consolidated financial statements are also exposed to the exchange rate risk deriving from the conversion into euros of the items relating to investments in companies whose currency of account is not the euro (translation risk). The exchange rate risk management policy is based on systematically hedging the exposures to which the Group companies are exposed, with the exception of translation risk. Appropriate operational processes ensure the definition and implementation of appropriate hedging strategies, which typically employ financial derivatives obtained on OTC markets. Controlling risk using dedicated processes and indicators makes it possible to limit potential adverse financial impacts while optimizing management of the cash flows of the portfolios. Commodity risk Exchange risk 58 Consolidated Annual Report 2019Interest rate risk Credit risk Liquidity risk The Group is exposed to the risk that changes in the level of interest rates could produce unexpected changes in net financial expense or the value of financial assets and liabilities measured at fair value. The exposure to interest rate risk derives mainly from the variability of the terms of financing, in the case of new debt, and from the variability of the cash flows in respect of interest on floating-rate debt. The policy for managing interest rate risk seeks to contain financial expense and its volatility by optimizing the Group’s portfolio of financial liabilities and by obtaining financial derivatives on OTC markets. Managing risk through the use of specific processes and indicators enables us to limit any adverse financial impact and, at the same time, to optimize the debt structure with an appropriate degree of flexibility. Commercial, commodity and financial transactions expose the Group to credit risk, i.e. the possibility of a deterioration in the creditworthiness of our counterparties that could have an adverse impact on the expected value of the creditor position and, for trade receivables only, increase average collection times. The exposure to credit risk is attributable to the following types of operations: > the sale and distribution of electricity and gas in free and regulated markets and the supply of goods and services (trade receivables); > trading activities that involve the physical exchange of assets or transactions in financial instruments (the commodity portfolio); > trading in derivatives, bank deposits and, more generally, financial instruments (the financial portfolio). The policy for managing credit risk associated with commercial activities and commodity transactions provides for a preliminary assessment of the creditworthiness of counterparties and the adoption of mitigation instruments, such as obtaining guarantees. Managing risk through the use of specific risk indicators, and limits where possible, ensures that the economic and financial impacts associated with a possible deterioration in creditworthiness are contained within sustainable levels. At the same time, the necessary flexibility to optimize portfolio management is preserved. In addition, the Group undertakes transactions to assign receivables without recourse, which results in the complete derecognition of the corresponding assets involved in the assignment. Finally, with regard to financial and commodity transactions, risk mitigation is pursued through the diversification of the portfolio (preferring counterparties with a high credit standing) and the adoption of specific standardized contractual frameworks that contain risk mitigation clauses (e.g. netting arrangements) and possibly the exchange of cash collateral. Liquidity risk is the risk that the Group, while solvent, would not be able to discharge its obligations in a timely manner or would only be able to do so on unfavorable terms owing to situations of tension or systemic crises (credit crunches, sovereign debt crises, etc.) or changes in the perception of Group riskiness by the market. Among the factors that define the risk perceived by the market, the credit rating assigned to Enel by rating agencies plays a decisive role, since it influences its ability to access sources of financing and the related financial terms of that financing. A deterioration in the credit rating could therefore restrict access to the capital market and/or increase of the cost of funding, with consequent negative effects on the performance and financial situation of the Group. In 2019, Fitch revised its rating for Enel upwards, from “BBB+” to “A-”. Moody’s also improved its outlook for Enel’s rating from stable to positive during the year. Accordingly, at the end of the year, Enel’s rating was: (i) “BBB+” with a stable outlook for Standard & Poor’s; (ii) “A-” with a stable outlook for Fitch; and (iii) “Baa2” with a positive outlook for Moody’s. Enel’s liquidity risk management policies are designed to maintain a level of liquidity sufficient to meet its obligations over a specified time horizon without having recourse to additional sources of financing as well as to maintain a prudential liquidity buffer sufficient to meet unexpected obligations. In addition, in order to ensure that the Group can discharge its medium and long-term commitments, Enel pursues a borrowing strategy that provides for a diversified structure of financing sources to which it can turn and a balanced maturity profile. Risk management 59 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsRisks connected with human capital The profound transformations of the energy sector, which has as well as the promotion of reskilling and upskilling programs experienced sweeping technological developments, require for employees in order to support the energy transition; the companies in the industry to recruit people with new experi- effective involvement of employees in the pursuit of the cor- ence and professional skills, as well as imposing the need for porate purpose, which ensures the achievement of better major cultural and organizational changes. Organizations must results while offering greater satisfaction to our people; the move to adopt new, agile and flexible business models. Poli- development of systems for evaluating the working environ- cies to enhance diversity and to manage and promote talent ment and performance; the dissemination of diversity and in- have become key factors for companies that are managing clusion policies to all countries in which the Group operates, the transition and have a widespread geographical presence. as well as instilling an inclusive organizational culture based Enel places the people who work for it at the center of its on the principles of non-discrimination and equal opportunity, business model: the management of human capital is a pri- a key driver in ensuring that everyone can make an effective ority for which specific objectives have been established. The contribution. In addition, Enel is developing specific initiatives main goals include: the development of the digital capabilities to foster the diffusion of agile working methods in business and skills made necessary by the Fourth Industrial Revolution, processes. 60 Consolidated Annual Report 2019Risks connected with digital technology The speed of technological developments that constantly generate new challenges, the ever increasing frequency and intensity of cyber attacks and the attraction of critical infrastructures and strategic industrial sectors as targets underscore the potential risk that, in extreme cases, the normal operations of companies could grind to a halt. Cyber attacks have evolved dramatically in recent years: their number has grown exponentially, as has their complexity and impact, making it increasingly difficult to promptly identify the source of threats. In the case of the Enel Group, this exposure reflects the many environments in which it operates (data, industry and people), a circumstance that accompanies the intrinsic complexity and interconnection of the resources that over the years have been increasingly integrated into the Group’s daily operating processes. The Group has adopted a holistic governance approach to cyber security that is applied to all the sectors of IT (Information Technology), OT (Operational Technology) and IoT (Internet of Things). The framework is based on the commitment of top management, on global strategic management, on the involvement of all business areas as well as on the units involved in the design and management of our systems. It seeks to use cutting edge technologies, to design ad hoc business processes, to strengthen people’s IT awareness and to implement regulatory requirements for IT security. In addition, the Group has developed an IT risk management methodology founded on “risk-based” and “cyber security by design” approaches, thus integrating the analysis of business risks into all strategic decisions. Enel has also created its own Cyber Emergency Readiness Team (CERT) in order to proactively respond to any IT security incidents. Finally, in 2019, the Group also took out an insurance policy for cyber security risks in order to mitigate IT threats. The Group is carrying out a complete digital transformation of how it manages the entire energy value chain, developing new business models and digitizing its business processes. A consequence of this digital transformation is that the Group is increasingly exposed to risks related to the functioning of the IT systems implemented throughout the Company, which could lead to service interruptions or data losses. These risks are managed using a series of internal measures developed by the Global Digital Solutions (GDS) unit, which is responsible for guiding the Group’s digital transformation. It has set up an internal control system that introduces control points along the entire IT value chain, enabling us to prevent the emergence of risks engendered by such issues as the creation of services that do not meet business needs, the failure to implement adequate security measures and service interruptions. The internal control system of the Global Digital Solutions unit oversees both the activities performed in-house and those outsourced to external associates and service providers. Furthermore, Enel is promoting the dissemination of a digital culture and digital skills within the Group in order to successfully guide the digital transformation and minimize the associated risks. Cyber attacks Digitalization, IT effectiveness and service continuity Risk management 61 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsRisks connected with the protection of personal data The collection and processing of personal data represents one appropriately can cause financial losses and reputational harm. of the biggest challenges in the era of digitalization and global- In order to manage and mitigate this risk, Enel has adopted ization of markets. The Group has taken up this challenge by a structure designed to fully protect the personal data of all accelerating the digital transformation process while rapidly the individuals with whom we interact. This effort is sustained expanding the number of customers and geographical scope by our Data Protection Officers, who are responsible for sup- of operations at the global level. This naturally increases our ex- porting the business areas in the adoption of a “privacy by posure to the risks connected with the protection of personal design” approach, in which the protection of personal data data, an issue that must also take account of the substantial is a key element of the design of any initiative or business growth in privacy legislation: implementing these regulations in- process. Environmental risks Last year saw the continuation of the growth in the sensitivity ment systems across the entire Group ensures the imple- of the entire community to risks connected with development mentation of structured policies and procedures to identify models that generate environmental impacts and exploit scarce and manage the environmental risks and opportunities asso- natural resources (including many raw materials and water). ciated with all corporate activities. In response to these needs, governments have imposed in- Also contributing are the multitude of actions to achieve creasingly restrictive environmental regulations, placing ever the challenging environmental improvement objectives set more stringent constraints on the development of new indus- by Enel, such as, for example, those regarding atmospheric trial initiatives and, in the most impactful industries, incentiv- emissions, waste production and water consumption, espe- izing or requiring the elimination of technologies no longer cially in areas with high water stress. considered sustainable. The risk of water scarcity is directly mitigated by Enel’s devel- In this context, companies in every sector, and above all in- opment strategy, which is based on the growth of generation dustry leaders, are ever more aware that environmental risks from renewable sources that are essentially not dependent are increasingly economic risks. As a result, they are called on the availability of water for their operation. Special atten- upon to increase their commitment and accountability for tion is also devoted to assets in areas with a high level of developing and adopting innovative and sustainable technical water stress, in order to develop technological solutions to solutions and development models. reduce consumption. Enel has made the effective prevention and minimization of Finally, ongoing collaboration with local river basin manage- environmental impacts and risks a foundational element of ment authorities enables us to adopt the most effective each project across its entire life cycle. shared strategies for the sustainable management of hydro- The adoption of ISO 14001-certified environmental manage- electric generation assets. 62 Consolidated Annual Report 2019Strategic risks and opportunities connected with climate change The identification and management of risks connected with climate change Climate change and the energy transition will impact Group activities in a variety of ways. output, while alterations in rainfall or wind conditions could impact the Group’s business by increasing or decreasing po- tential electricity generation. The energy transition towards a more sustainable model char- acterized by a gradual reduction of CO2 emissions has risks and opportunities connected both with changes in the regula- In order to identify the main types of risk and opportunity and tory and legal context and trends in technology development, their impact on the business associated with them in a struc- electrification and the consequent market developments. tured manner consistent with the TCFD, we have adopted a Consistent with the climate and transition scenarios used by framework that explicitly represents the main relationships Enel to determine risks and opportunities, the main transi- between scenario variables and types of risk and opportunity, tion-related phenomena are beginning to emerge in relation specifying the strategic and operational approaches to man- to customer behavior, industrial strategies being adopted in all aging them, comprising mitigation and adaptation measures. economic sectors and regulatory policies. Between 2020 and There are two main macro-categories of risks/opportunities: 2030, the transition trends will become visible in response to those connected with developments in physical variables and the evolution of the context: the Enel Group has decided to those linked to the evolution of the transition scenarios. facilitate the transition, and is therefore ready to seize all the Physical risks are divided in turn between acute (i.e. extreme opportunities that may arise from an acceleration in that tran- events) and chronic, with the former linked to extremely in- sition. As discussed previously, our strategic choices, which tense meteorological conditions and the latter to more gradual are already strongly oriented towards the energy transition, to but structural changes in climate conditions. which we have dedicated more than 90% of investments, en- Extreme events expose the Group to the risk of prolonged able us to incorporate risk mitigation and opportunity maximi- unavailability of assets and infrastructure, the cost of restoring zation “by design”, adopting a positioning that takes account service, customer disruptions and so on. Chronic changes in of the medium and long-term phenomena we have identified. climate conditions expose the Group to other risks or oppor- The strategic choices are accompanied by the operating best tunities: for example, structural changes in temperature could practices adopted by the Group. cause changes in electricity demand and have an impact on Risk management 63 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsFramework on the main risks and opportunities SCENARIO PHENOMENA TIME HORIZON RISK & OPPORTUNITY CATEGORY DESCRIPTION IMPACT MANAGEMENT APPROACH Acute physical Extreme events Starting with short term (1-3 years) Risk: especially extreme weather/ climate events. Extreme events can damage assets and interrupt operations. Chronic physical Market Starting with long term (2030-2050) Risk/opportunity: increase or decrease in electricity demand; increase or decrease in output. Electricity demand is also affected by temperature, whose fluctuation can impact our business. Transition Starting with medium term (2022-2030) Policy & Regulation Policies concerning the energy transition and resilience can impact the volume of and returns on investments. Risk/opportunity: policies on CO2 prices and emissions, energy transition incentives, greater scope for investment in renewables and resilience regulation. The Group adopts best practices to manage the restoration of service as quickly as possible. We also work to implement investments in resilience (for Italy). With regard to risk assessment in insurance, the Group has a loss prevention program for property risk that also assesses the main exposures to natural events. Looking forward, the assessments will also include the potential impacts of long-term trends in the most significant climate variables. The Group’s geographical and technological diversification means that the impact of changes (positive and negative) in a single variable is mitigated at the global level. In order to ensure that operations always take account of weather and climate phenomena, the Group adopts a range of practices such as, for example, weather forecasting, real-time monitoring of plants and long-term climate scenarios. The Group is minimizing its exposure to risks through the progressive decarbonization of its generation fleet. The Group’s strategic actions, which are focused on investment in renewables, networks and customers, enable us to mitigate potential threats and exploit the opportunities connected with the energy transition. The Group is also actively contributing to the formation of public policies. 64 Consolidated Annual Report 2019 SCENARIO PHENOMENA TIME HORIZON RISK & OPPORTUNITY CATEGORY DESCRIPTION IMPACT MANAGEMENT APPROACH Transition Market Starting with medium term (2022-2030) Transition Starting with medium term (2022-2030) Products & Services Technology Starting with medium term (2022-2030) Risk/opportunity: changes in the prices of commodities and energy, evolution of energy mix, changes in retail consumption, changes in competitive environment. Opportunity: increase in margins and greater scope for investment as a consequence of the transition in terms of greater penetration of new electrical technologies for residential consumption and electric transportation. Considering two alternative transition scenarios, the Group assesses the impact of trends in the proportion of renewable sources in the energy mix, electrification and the penetration of EVs to estimate their potential impacts. Trends in the electrification of transportation and residential consumption will potentially have an impact on our business. Considering two alternative transition scenarios, the Group assesses the potential opportunities to scale up current businesses in response to trends in the electrification of transportation. The Group is maximizing opportunities by adopting a strategy founded on the energy transition and the rapid expansion of renewable generation and the electrification of energy consumption. The Group is maximizing opportunities thanks to its strong positioning in new businesses and services. The Group is maximizing opportunities thanks to its strong positioning in global networks. The framework illustrated above also highlights the relation- in which chronic structural changes in the climate should begin ships that link the physical and transition scenarios with the to emerge. The main sources of risk and opportunity identified, potential impact on the Group’s business. These effects can be the best practices for the operational management of weather assessed from the perspective of three time horizons: the short and climate phenomena, and the qualitative and quantitative term (1-3 years), in which sensitivity analyses based on the Stra- impact assessments performed to date are discussed below. tegic Plan presented to investors in 2019 can be performed; the As declared by the TCFD, the process of disclosing information medium term (until 2030), in which it is possible to assess the on the risks and opportunities connected with climate change effects of the energy transition; and the long term (2030-2050), will be gradual and incremental from year to year. Risk management 65 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements SCENARIO PHENOMENA RISK & OPPORTUNITY CATEGORY DESCRIPTION TIME HORIZON(1) IMPACT GBL AFFECTED SCOPE QUANTIFICATION - TYPE OF IMPACT UPSIDE/ DOWNSIDE QUANTIFICATION - RANGE <100 €MLN 100-300 €MLN >300 €MLN Global Power Generation Group EBITDA/year Group Potential hydroelectric output EBITDA/year Global Power Generation Potential wind EBITDA/year Group output Group output Potential solar EBITDA/year +1% Upside -1% Downside +10% Upside -10% Downside +10% Upside -10% Downside +10% Upside -10% Downside Chronic physical Market Risk/opportunity: increase or decrease in electricity demand. Short term Chronic physical Market Risk/opportunity: increase or decrease in renewables generation. Short term (1) Time horizon: short (2020-2022); medium (up to 2030); long (2030-2050). Electricity demand is also affected by temperature, whose fluctuations can have an impact on our business. Although structural changes should not emerge in the short/medium-term, in order to assess the sensitivity of Group performance to potential temperature variations, we have performed an analysis of sensitivity to changes of +/-1% in electricity demand for the Group as a whole. Renewables generation is also affected by the availability of resources, whose fluctuations can have an impact on our business. Although structural changes should not emerge in the short/medium- term, in order to assess the sensitivity of Group performance to potential temperature variations, we have performed an analysis of sensitivity to changes of +/-10% in potential electricity output by technology. Chronic and acute physical phenomena: repercussions on our business, risks and opportunities Taking the IPCC scenarios as our reference point, developments Chronic physical changes creating risks and opportunities The climate scenarios developed with the ICTP do not provide definitive indications of structural changes before 2030, but changes could begin to emerge between 2030 and 2050. in the following physical variables and the associated operational The main impacts of chronic physical changes would be reflect- and industrial impacts connected with potential risks and oppor- ed in the following variables: tunities are assessed. > Electricity demand: variation in the average temperature level with a potential increase or reduction in electricity demand. > Thermal generation: variation in the level and average temperatures of the oceans and rivers, with effects on thermal generation. > Hydroelectric generation: variation in the average level of rainfall and snowfall and temperatures with a potential increase or reduction in hydro generation. > Solar generation: variation in the average level of solar radiation, temperature and rainfall with a potential increase or reduction in solar generation. > Wind generation: variation in the average wind level with a potential increase or reduction in wind generation. The Group will work to estimate the relationships between changes in physical variables and the change in the potential output of individual plants in the different categories of generation technology. Variables impacted by chronic physical changes 66 Consolidated Annual Report 2019 SCENARIO PHENOMENA RISK & CATEGORY OPPORTUNITY DESCRIPTION TIME HORIZON(1) IMPACT GBL AFFECTED SCOPE QUANTIFICATION - TYPE OF IMPACT UPSIDE/ DOWNSIDE QUANTIFICATION - RANGE <100 €MLN 100-300 €MLN >300 €MLN Chronic physical Market increase or decrease in Short term Risk/opportunity: electricity demand. Global Power Generation Group EBITDA/year Chronic physical Market increase or decrease in Short term term, in order to assess the sensitivity of Group Risk/opportunity: renewables generation. Global Power Generation Group Potential hydroelectric output Group Potential wind output Group Potential solar output EBITDA/year EBITDA/year EBITDA/year Electricity demand is also affected by temperature, whose fluctuations can have an impact on our business. Although structural changes should not emerge in the short/medium-term, in order to assess the sensitivity of Group performance to potential temperature variations, we have performed an analysis of sensitivity to changes of +/-1% in electricity demand for the Group as a whole. Renewables generation is also affected by the availability of resources, whose fluctuations can have an impact on our business. Although structural changes should not emerge in the short/medium- performance to potential temperature variations, we have performed an analysis of sensitivity to changes of +/-10% in potential electricity output by technology. +1% Upside -1% Downside +10% Upside -10% Downside +10% Upside -10% Downside +10% Upside -10% Downside (1) Time horizon: short (2020-2022); medium (up to 2030); long (2030-2050). Upside scenario current policies Downside scenario current policies Scenario analysis has shown that chronic structural changes in ty demand (+/-1% per year), whose variations can potentially the trends of physical variables will begin to occur after 2030. impact the generation and retail businesses. It was stress However, in order to obtain an indicative estimate of the po- tested for all countries in which the Group operates. The out- tential impacts, it is possible to test sensitivity of the Busi- put potential of renewable plants was also stressed (+/-10% ness Plan to the factors potentially influenced by the physical over a single year). Variations in this variable can potentially scenario, regardless of any direct relationship with climate impact the generation business. It was stressed separately variables. Of course, such stress testing has an extremely low at the individual technology level around the globe. The data probability of occurrence based on historical events and geo- reported show the effect on a single year for a single genera- graphical diversification. The variables examined are: electrici- tion technology and include both the volume and price effects. Risk management 67 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements Acute physical changes that represent sources of risk and opportunity With regard to acute physical phenomena (extreme events), the incidence and frequency of extreme physical phenomena can cause significant and unexpected physical damage to as- sets and generate negative externalities associated with the interruption of service. To assess the scale of the risks of extreme climate events, the in determining the processes and practices to be deployed in mitigating such events in the future. Generation With regard to generation, over time the Group has imple- mented targeted measures at specific sites and established ad hoc management activities and processes. Measures implemented for specific sites in recent years in- scenario results will be examined in terms of the frequency clude: and intensity of the key phenomena, together with technical information on generation assets, taking account of the differ- ing levels of resilience, and identifying metrics to measure po- tential losses and any externalities caused by the interruption of business operations. The intensification of the effects of climate change means it is essential to adopt adaptive behaviors: each catastrophic event represents a lesson learned for Enel, from which we draw inspiration to strengthen design techniques and preventive measures to ensure the resilience of the asset portfolio. From this perspective, the method and the information ex- tracted from the ex post analysis of events play a crucial role > improving cooling water management systems for certain plants in order to counter the problems caused by the de- cline in water levels on rivers, such as the Po in Italy; > installing fogging systems to improve the flow of inlet air and offset the reduction in power output caused by the increase in ambient temperature in CCGTs; > installing drainage pumps, raising embankments, periodic cleaning of canals and interventions to consolidate land ad- jacent to plants to prevent landslides in order to mitigate flood risks. The Group adopts a series of best practices to manage the impact of weather events on power generation, such as: Group practices for managing weather events in generation operations > Weather forecasting both to monitor renewable resource availability and detect extreme events, with warning systems to ensure the protection of people and assets. > Insurance policies to cover damage to assets and the negative externalities caused, for example, by lost electricity production. > Real-time remote monitoring of generation plants. > Safe rooms in areas exposed to tornadoes and hurricanes, such as the wind farms in Oklahoma in the United States. In addition, in order to ensure rapid response to adverse events, the Group has adopted specific emergency manage- Infrastructure and Networks The Enel Group’s Infrastructure and Networks Global Busi- ment procedures with protocols for real-time communication ness Line has adopted a more complex and innovative ap- and management of all activities to restore operations rapidly proach to respond to such extreme events denominated “4R”, and standard checklists for damage assessment and the safe in addition to the measures already envisaged to upgrade and return to service for all plants as rapidly as possible. improve the electricity distribution grid. This new approach has been structured over the past few years in a body of doc- umentation that governs the measures to be taken in prepara- tion for a grid emergency once the damage has been caused. More specifically, the 4R strategy comprises: 68 Consolidated Annual Report 2019 An initial “risk prevention” phase, which includes all actions to reduce the probability of losing grid components due to an event and/or to minimize its effects. This is pursued both through measures to enhance the robustness of grid infrastructure in extreme weather events and maintenance measures. Measures to reinforce the grid have been implemented not only to improve service quality in general, but also to reduce the risk of prolonged or widespread outages in the event of a malfunction, using a probabilistic approach. This approach has mainly been used to reduce the risk of outages at critical installations (primary substations) or for particular grid configurations (where no alternative power supply routes are available). In Italy, to prevent service interruptions due to the breakage of overhead power lines as a result of snowfall, the risk of such interruptions has been assessed on the basis of the probability of losing segments of the grid and then calculating the relative impact in terms of customers without power and the loss in terms of power not delivered. To address these risks, investments include the targeted replacement of uninsulated lines with insulated conductors, increasing the number of alternative routes to restore power and the use of remote control systems to isolate the section of the grid affected by the fault as quickly as possible. Again in Italy, the measures to increase resilience are contained in the three-year investment plan of e-distribuzione and are designed to limit the risk of service interruptions caused by the main critical factors that may impact e-distribuzione’s medium-voltage grid. The measures for the 2017-2021 period involve some 4 million customers and over 7,000 km of medium-voltage lines. A subsequent “readiness” phase that includes all measures to improve the timeliness with which potentially risky events are identified, ensuring coordination with the Civil Protection Department and local officials, as well as to prepare intervention measures once a fault has occurred. Examples of measures include systems for forecasting meteorological events and their impact on the grid, the provisioning of adequate equipment to build temporary plant or emergency grid structures, the preparation of operational plans and the organization of exercises. One of the most important measures is certainly the definition of agreements for the mobilization of designated extraordinary resources to respond to an emergency. These include both internal resources and the resources of contracting companies operating in other areas of a country and/or in other countries. 4R - Risk prevention 4R - Readiness 4R - Response The third phase is the “response” phase, meaning the operational response capacity for a specific extreme event, which is directly correlated with the ability to mobilize operational resources in the field and with the availability of grid backup and redundancies. 4R - Recovery The final phase is the “recovery” phase, which seeks to restore an acceptable and safe level of service in the shortest possible time. Response and recovery are complementary. The philosophy of the most effective strategy to manage the repair of power that guides interventions in these two phases is that excep- lines and the restoration of service to customers. tional resources must be used to deal with exceptional events, In this regard, the Enel Group in Italy is a permanent guest and that all the available resources prepared in the readiness of the Operations Committee of the National Civil Protection phase must therefore be mobilized. The assessment of the Department and has signed protocols with both the National damage caused to the grid is the first activity to be performed. Civil Protection Department and Regional Civil Protection De- Enel promptly activates a task force of specialized technicians partments in order to facilitate communication in emergency and deploys special equipment (helicopters and generators) situations, joint training and any other initiative that makes to restore service, and mobilizes personnel from other areas/ collaboration with the civil protection system more effective countries. Great attention is paid in these phases to commu- and rapid. nication with all the players involved and the determination Risk management 69 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsTransition phenomena: repercussions on our business, risks and opportunities With regard to the risks and opportunities associated with transition variables, we use the different reference scenarios in combination with the various elements that make up the risk identification process (e.g. competitive context, long-term vision of the industry, materiality analysis, etc.) to identify the drivers of potential risks and opportunities. Priority is given to the most material phenomena. The main risks and opportu- nities identified within this framework are described below. Policy & Regulation Limits on emissions and carbon pricing Incentives for the energy transition The enactment of laws and regulations that introduce more stringent emission limits by government action (non-market driven) and market-based mechanisms, such as a carbon tax in non-ETS (Emissions Trading System) sectors or an expansion of the ETS in other sectors. > Opportunities: command & control regulations and market-based mechanisms strengthening CO2 price signals to foster investment in carbon-free technologies. > Risks: lack of a coordinated approach among the various actors and policy-makers involved and limited effectiveness of the policy instruments deployed, with an impact on the speed of the trend towards electrification and decarbonization in the various sectors, compared with a decisive group strategy focused on the energy transition. Development incentives and opportunities with a view to the energy transition, consequently guiding the energy system towards the use of low-emission energy resources as the mainstream approach in the energy mixes of countries, greater electrification of energy consumption, energy efficiency, flexibility of the electrical system and upgrading of infrastructure, with a positive impact on the return on investment and new business opportunities. > Opportunities: additional volumes and greater margins due to additional investment in the electricity industry, in line with the electrification strategy, decarbonization and the upgrading of enabling infrastructure. > Risks: obstacles to achieving energy transition targets due to regulatory systems that do no effectively support the energy transition (delays in permitting, no upgrading of the electricity grid, etc.). Resilience regulation To improve standards or introduce ad hoc mechanisms to incentivize investments in resilience in the context of the evolution of climate change. > Opportunities: benefits from investments that reduce service quality and continuity risks for the community. > Risks: in the case of especially severe extreme events with a greater-than-expected impact, there is a risk that recovery could be slower than planned, with an associated reputational risk.). Financial measures for the energy transition Incentives for the energy transition through appropriate policy measures and financial instruments, which should be capable of supporting an investment framework and a long-term, credible and stable positioning of policy-makers. Introduction of rules and/or public and private financial instruments (e.g. funds, mechanisms, taxonomies, benchmarks) aimed at integrating sustainability into financial markets and public finance instruments. > Opportunities: the creation of new markets and sustainable finance products consistent with the investment framework, activating greater public resources for decarbonization and access to financial resources in line with energy transition objectives and the related impact on costs and on finance charges; introduction of subsidized support tools (funds and calls) for the transition. > Risks: actions and instruments are not sufficient to provide incentives consistent with an overall positioning tailored to the energy transition, uncertainty or slowdown in the introduction of new instruments and rules due to the deterioration in the public finances or differences in application in the geographic areas in which the Group operates. 70 Consolidated Annual Report 2019Market Market dynamics, such as those connected with the variability of commodity prices, the increase in electricity consumption due to the energy transition and the penetration of renewables, have an impact on business drivers, with effects on margins and on production and sales volumes. Market dynamics > Opportunities: positive effects associated with the growth in electricity demand and the greater room for renewables and all sources of flexibility. > Risks: less room in the market for residual thermal generation technologies in the short term. However, as the penetration of renewables in the electricity mix increases, the system could require greater flexibility, including regulated gas-fired generation. Technology Penetration of new technologies Gradual penetration of new technologies such as storage and demand response; digital lever to transform operating models and “platform” business models. > Opportunities: investments in developing technology solutions. Products and Services Electrification of residential energy consumption Electric mobility and electrification of industrial energy consumption With the gradual electrification of end uses, the penetration of products with lower costs and a smaller impact in terms of residential emissions will expand (for example, the use of heat pumps for heating and cooling). > Opportunities: increase in electricity consumption. > Risks: additional competition in this market segment. Use of more efficient and effective modes of transportation from the point of view of climate change, with a special focus on the development of electric mobility and charging infrastructure; electrification of large-scale industrial energy users. > Opportunities: positive effects of the increase in electricity demand and greater margins connected with the penetration of electric transportation. The Group has already taken strategic actions to mitigate po- As with climate variables, we can test the current Business tential risks and exploit the opportunities offered by the energy Plan (2020-2022) for its sensitivity to the factors potentially in- transition. Thanks to our industrial and financial strategy incor- porating ESG factors, an integrated approach shaped by sus- tainability and innovation makes it possible to create long-term shared-value. A strategy focused on complete decarbonization and the ener- fluenced by the transition scenario, with particular regard to the price of CO2 (ETS). Examining the main transition variables, the price of CO2 appears to be an especially reliable driver of reg- ulatory measures that could accelerate the transition process. gy transition makes the Group resilient to the risks associated with the introduction of more ambitious policies for emission reductions and maximizes opportunities for the development of To assess the impact of possible changes in this driver, the ef- fects of a potential change of +/-10% in the CO2 price for Italy and Spain are determined. This price change would modify the renewable generation, infrastructure and enabling technologies. equilibrium price of both wholesale markets, with repercus- Unlike chronic climate impacts, developments in the transition sions on the margins of Global Power Generation for both ther- scenario could have impacts in the short and medium term (by mal and renewable plants. 2030) as well. Risk management 71 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsTo quantify the risks and opportunities engendered by the energy transition in the medium term, two scenarios have been considered for Italy and Spain: “Current policies” scenario Based on the current energy transition policies of Italy and Spain (PNIEC), which are presumably consistent with an intermediate climate scenario between RCP 8.5 and RCP 2.6. The “current policies” scenario considered for the two countries, while among the less ambitious scenarios of RCP 2.6, represents a plausible outlook in that it derives from policies that have already been approved and which will probably not be disregarded. At a global level, however, if the world’s leading countries do not adopt effective decarbonization policies, instead pursuing policies that produce no change or actually worsen conditions, the “current policies” approach could still lead to a climate scenario in line with SPC 8.5. “Accelerated policies” scenario Based on potential rapid transition policies aimed at achieving CO2 reduction targets that are presumably consistent with the RCP 2.6 scenario. This scenario also incorporates an increase in energy efficiency and a drive to electrify end-user energy consumption. SCENARIO PHENOMENA RISK & OPPORTUNITY CATEGORY DESCRIPTION TIME HORIZON (1) IMPACT GBL AFFECTED SCOPE QUANTIFICATION - TYPE OF IMPACT UPSIDE/ DOWNSIDE QUANTIFICATION - RANGE <100 €MLN 100-300 €MLN >300 €MLN ACCELERATED IMPACT WITH TRANSITION Transition Policy & Regulation Risk: impact on margin due to measures affecting CO2 price. Short/medium term Considering the potential impact of regulatory me- asures to incentivize energy transition, the Group assesses the exposure to changes of +/- 10% in the price of CO2 using sensitivity analysis. Global Power Generation Italy and Iberia EBITDA/year +10% Upside -10% Downside Transition Market Transition Products & Services Opportunity: incease in margins due to impact of transition on electrification of energy consumption. Risk: increase in competition and possible decrease in market share. Opportunity: increase in margins and greater scope for investment due to impact of transition in terms of penetration of new technologies and electric transportation. Medium term Considering two alternative transition scenarios, the Group assesses the impact of trends in efficiency, the adoption of electric devices and the penetration of EVs to estimate its potential effect on electricity demand. Medium term Considering two alternative transition scenarios, the Group has assessed the impact of trends in the electrification of transportation and residential consumption to assess the potential effects. (1) Time horizon: short (2020-2022); medium (up to 2030); long (2030-2050). Retail Enel X Italy and Iberia EBITDA 2030 vs 2022 Upside Italy and Iberia Gross margin Σ 2022-2030 Upside 72 Consolidated Annual Report 2019 Considering these transition scenarios and models of the en- ables or accelerating the phase-out of obsolete technologies). ergy system, we determined their impact on the variables that By 2030, the dynamics of the energy transition may produce most greatly affect our business, such as electricity demand, significant opportunities in the retail electricity market. The pro- the system energy mix and the increase in electricity consump- gressive electrification of final consumption, especially in trans- tion due to the electrification of final consumption. The transition portation and the residential sector, will lead to a significant in- effects over the medium term can produce new opportunities, crease in electricity consumption. thanks to the growth of renewables, and potential risks linked Considering the transition scenarios developed by the Group for to the loss of profitability for thermal plants. Based on assump- Italy and Spain, the increase in electricity consumption in the do- tions about future regulatory developments and market trends, mestic segment could produce an increase of more than €300 we can forecast developments in output in the Group’s elec- million in EBITDA by 2030 compared with 2022. Considering a tricity markets (for now, Italy and Spain only) and unit margins. more optimistic transition scenario, i.e. one with a higher elec- These considerations offer a basis for determining the Group’s trification rate for transportation and heating/cooling, the effects possible strategic positioning in terms of resource allocation (for could be even greater, leaving unchanged the assumptions for example, maintaining or increasing our market share in renew- margins and market share set out in the Plan. SCENARIO PHENOMENA RISK & CATEGORY OPPORTUNITY DESCRIPTION TIME HORIZON (1) IMPACT GBL AFFECTED SCOPE QUANTIFICATION - TYPE OF IMPACT UPSIDE/ DOWNSIDE <100 €MLN 100-300 €MLN >300 €MLN QUANTIFICATION - RANGE IMPACT WITH ACCELERATED TRANSITION Transition Policy & Regulation Risk: impact on margin due to measures affecting CO2 price. Considering the potential impact of regulatory me- Short/medium asures to incentivize energy transition, the Group term assesses the exposure to changes of +/- 10% in the price of CO2 using sensitivity analysis. Global Power Generation Italy and Iberia EBITDA/year +10% Upside -10% Downside Transition Market energy consumption. Medium term the adoption of electric devices and the penetration Opportunity: incease in margins due to impact of transition on electrification of Risk: increase in competition and possible decrease in market share. Opportunity: increase in margins and greater scope for investment due terms of penetration of new technologies and electric transportation. Considering two alternative transition scenarios, the Group assesses the impact of trends in efficiency, of EVs to estimate its potential effect on electricity demand. Considering two alternative transition scenarios, the Group has assessed the impact of trends in the electrification of transportation and residential consumption to assess the potential effects. Transition to impact of transition in Medium term Products & Services Retail Enel X Italy and Iberia EBITDA 2030 vs 2022 Upside Italy and Iberia Gross margin Σ 2022-2030 Upside Upside scenario current policies Downside scenario current policies Risk management 73 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements 74 Relazione Finanziaria Annuale 20194. PERFORMANCE & METRICS REPORT ON OPERATIONS 75 Xxxxxxxxx XxxxxxxxxxxDefinition of performance indicators In order to present the results of the Group and analyze their as well as significant impairment losses on assets following financial structure, Enel has prepared separate reclassified impairment testing or classification under “Assets held for schedules that differ from the schedules envisaged under sale”. the IFRS-EU adopted by the Group and presented in the con- solidated financial statements. These reclassified schedules Group ordinary net income: it is defined as “Group net in- contain different performance indicators from those obtained come” generated by Enel’s core business and is equal to directly from the consolidated financial statements, which “Group net income” excluding the impact on it (and there- management believes are useful in monitoring the perfor- fore net of any tax effects and non-controlling interests) of the mance of the Group and representative of the financial perfor- items discussed under “Ordinary operating income”. mance of our business. With regard to those indicators, on December 3, 2015, CON- Low carbon ordinary EBITDA: it is the ordinary gross operat- SOB issued Communication no. 92543/15, which gives force ing margin of the set of products, services and technologies to the Guidelines issued on October 5, 2015, by the European included in the following Business Lines: Enel Green Power, Securities and Markets Authority (ESMA) concerning the pre- Infrastructure and Networks, Enel X and End-user Markets sentation of alternative performance measures in regulated (excluding gas). information disclosed or prospectuses published as from July 3, 2016. These Guidelines, which update the previous CESR Gross global value added from continuing operations: this Recommendation (CESR/05-178b), are intended to promote is defined as value created for stakeholders and is equal to the usefulness and transparency of alternative performance “Revenue”, including “Net income/(expense) from commodity indicators included in regulated information or prospectuses management” net of external costs defined as the algebraic within the scope of application of Directive 2003/71/EC in or- sum of “cost of fuels”, “cost of electricity purchases”, “costs der to improve their comparability, reliability and comprehen- of materials”, “capitalized costs of internal projects”, “other sibility. costs” and “costs for services, rentals and leases”, with the Accordingly, in line with the regulations cited above, the crite- latter net of “costs for fixed water diversion fees” and “costs ria used to construct these indicators are the following. for public land usage fees”. Gross operating margin: an operating performance indicator, Net non-current assets: calculated as the difference between calculated as “Operating income” plus “Depreciation, amorti- “Non-current assets” and “Non-current liabilities” with the zation and impairment losses”. exception of: > “Deferred tax assets”; Ordinary gross operating margin: it is calculated by adjust- > “Securities” and “Other financial receivables” included in ing the “Gross operating margin” for all items generated by “Other non-current financial assets”; non-recurring transactions, such as acquisitions or disposals > “Long-term borrowings”; of businesses (for example, capital gains and losses), with the > “Employee benefits”; exception of those transactions carried out in the renewable > “Provisions for risks and charges (non-current portion)”; segment, related to the new “Build, Sell and Operate” busi- > “Deferred tax liabilities”. ness model launched in the 4th Quarter of 2016, where the in- come from the disposal (or repurchase) of projects represents Net current assets: calculated as the difference between an ordinary activity for the Group. “Current assets” and “Current liabilities” with the exception Ordinary operating income: it is calculated by adjusting the > “Current portion of long-term financial receivables”, “Fac- “Operating income” for the effects of the non-recurring trans- toring receivables”, “Securities”, “Cash collateral” and actions referred to with regard to the gross operating margin, “Other financial receivables” included in “Other current of: 76 Consolidated Annual Report 2019financial assets”; > “Cash and cash equivalents”; > “Long-term borrowings” and “Short-term borrowings and the current portion of long-term borrowings”, taking ac- > “Short-term borrowings” and the “Current portion of long- count of “Short-term financial payables” included in “Other term borrowings”; current liabilities”; > “Provisions for risks and charges (current portion)”; > net of “Cash and cash equivalents”; > “Other financial payables” included in “Other current lia- > net of the “Current portion of long-term financial receiv- bilities”. ables”, “Factoring receivables”, “Cash collateral” and “Oth- er financial receivables” included in “Other current financial Net assets held for sale: calculated as the algebraic sum of assets”; “Assets held for sale” and “Liabilities held for sale”. > net of “Securities” and “Other financial receivables” in- cluded in “Other non-current financial assets”. Net capital employed: calculated as the sum of “Net non-cur- More generally, the net financial debt of the Enel Group is rent assets” and “Net current assets”, “Provisions for risks calculated in accordance with paragraph 127 of Recommen- and charges”, “Deferred tax liabilities” and “Deferred tax as- dation CESR/05-054b implementing Regulation (EC) no. sets”, as well as “Net assets held for sale”. 809/2004 and in line with the CONSOB instructions of July 28, 2006, net of financial receivables and long-term securities. Net financial debt: a financial structure indicator, determined by: Main changes in the scope of consolidation In the two periods under review, the scope of consolidation information, please see note 6 on the consolidated financial changed as a result of a number of transactions. For more statements. Definition of performance indicators 77 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements78 Consolidated Annual Report 2019 Consolidated Annual Report 2019Performance of the Group Operations 229.1 TWh Net electricity generation of which 99.4 TWh renewables 50% Net efficient installed renewable capacity for a total of 42.1 GW 2.2 mln km Electricity distribution and transmission grid 44.7 mln End users with active smart meters of which 13.1 mln of second generation 69.9 mln Retail customers of which 22.8 mln free market 79,565 Charging points +62.5% compared with 2018 The following presents the operating, environmental and financial performance of the Group SDG 7 7 7 7 9 9 9 11 11 11 Net electricity generation (TWh) of which: - renewables (TWh) Total net efficient capacity (GW) Net efficient installed renewable capacity (GW) Net efficient installed renewable capacity (%) Net efficient additional installed renewable capacity (GW) Electricity transported on Enel’s distribution grid (TWh) (1) End uses with active smart meters (no.) Electricity distribution and transmission grid (km) End users (no.) Electricity sold by Enel (TWh) Gas sold to end users (billions of m3) Retail customers (no.) - of which free market Demand response capacity (MW) Charging points (no.) Storage (MW) (1) The figure for 2018 reflects a more accurate measurement of quantities transported. Performance of the Group 2019 229.1 99.4 84.3 42.1 50% 3.58 504.0 44,668,538 2,230,029 73,258,840 301.7 10.5 69,914,992 22,780,590 6,297 79,565 110 2018 250.3 98.9 85.6 39.2 46% 2.68 484.4 43,770,085 2,226,097 72,945,664 295.4 11.2 71,117,743 21,478.721 6,215 48,967 70 Change (21.2) 0.5 (1.3) 2.9 4% 0.90 19.6 898,453 3,932 313,176 6,3 (0.7) (1,202,751) 1,301,869 82 30,598 40 79 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNet electricity generation (%) Net electricity generation in 2019 totaled 229.1 TWh, a decrease on 2018 that reﬂected an 18.7% decline in thermal generation compared with the previous year, mainly due to a reduction in coal-ﬁred generation (-41.6% compared with 2018). Contributing to this development, which was connected with the decarbonization of the generation mix cited above, were operations in Italy and Spain, as well as the sale of the Reftinskaya power plant in Russia. 2019 Solar 1.7% Nuclear plants 11.5% Total 229.1 TWh Coal-ﬁred plants 16.4% Hydroelectric 27.3% Wind 11.7% Geothermal and other 2.7% Combined-cycle plants 19.6% Fuel-oil and turbo-gas plants 9.1% Total renewable sources 43.4% Total traditional sources 56.6% 2018 Total 250.3 TWh Solar 2.0% Nuclear plants 9.6% Coal-ﬁred plants 25.7% Hydroelectric 26.3% Wind 8.8% Geothermal and other 2.4% Combined-cycle plants 15.3% Fuel-oil and turbo-gas plants 9.9% Total renewable sources 39.5% Total traditional sources 60.5% Total net efficient capacity (%) At the end of December 2019, the Group’s total net efficient installed capacity was 84.3 GW, down 1.3 GW from 2018, mainly due to the sale of the Reftinskaya coal-ﬁred power plant in Russia. This reduction was partially offset by the entry into operation of new renewable plants, mainly wind and solar in Spain, Mexico and the United States. 2019 Solar 3.7% Nuclear plants 3.9% Total 84.3 GW Coal-ﬁred plants 13.8% Hydroelectric 33.0% Wind 12.3% Geothermal and other 1.0% Combined-cycle plants 17.8% Fuel-oil and turbo-gas plants 14.5% Total renewable sources 50.0% Total traditional sources 50.0% 2018 Solar 2.7% Nuclear plants 3.9% Total 85.6 GW Coal-ﬁred plants 18.5% Hydroelectric 32.5% Wind 9.6% Geothermal and other 1.0% Combined-cycle plants 17.5% Fuel-oil and turbo-gas plants 14.3% Total renewable sources 45.8% Total traditional sources 54.2% 80 Consolidated Annual Report 2019Main climate change and environmental sustainability indicators 296 g/kWheq Specific emissions of CO2 from total generation -19.8% compared to 2018 54.85% Zero-emission generation (% of total) €16,211 mln EBITDA for low-carbon products, services and technologies +10.7% compared to 2018 €9,131 mln Capex for low-carbon products, services and technologies Direct greenhouse gas emissions - Scope 1 (million/teq) (1) Indirect greenhouse gas emissions - Scope 2 (million/teq) purchase of electricity from the grid (location based) (2) Indirect greenhouse gas emissions - Scope 2 (million/teq) purchase of electricity from the grid (market based) (2) Indirect greenhouse gas emissions - Scope 2 (million/teq) distribution grid losses (location based) (1) Indirect greenhouse gas emissions - Scope 3 (million/teq) (1) of which emissions connected with gas sales (million/teq) Specific emissions of CO2 from total generation (g/kWheq) (3) Specific emissions of SO2 (g/kWheq) (3) Specific emissions of NOx (g/kWheq) (3) Specific emissions of particulates (g/kWheq) (3) Total direct fuel consumption (Mtoe) Reference price of CO2 (€) Average efficiency of thermal plants (%) (4) Zero-emission generation (% of total) EBITDA for low-carbon products, services and technologies (millions of €) Capex for low-carbon products, services and technologies (millions of €) Ratio of capex for low-carbon products, services and technologies to total (%) Water withdrawal in water-stressed areas (%) Specific water requirement for total generation (l/kWheq) 2019 70.0 1.55 2.30 3.82 56.92 23.9 296 0.59 0.60 0.12 30.1 24.8 42.0 54.85 16,211 9,131 92% 14.1 0.33 2018 95.2 1.40 2.11 3.68 59.56 25.4 369 0.75 0.72 0.17 37.0 15.9 40.1 49.14 14,645 7,773 91% 11.6 0.38 Change (25.2) -26.5% 0.2 0.2 0.1 (2.64) (1.5) (73.0) (0.2) (0.1) (0.1) (6.9) 8.9 1.9 5.71 1,566.0 1,358.0 - 2.5 (0.1) 10.7% 9.0% 3.8% -4.4% -5.9% -19.8% -21.3% -16.7% -29.4% -18.6% 56.0% 4.7% 11.6% 10.7% 17.5% 1.1% 21.6% -13.2% (1) The Scope values for 2018 have been modified by adding the new calculation categories introduced in 2019. (2) Scope 2 emissions for electricity purchased from the grid have been recalculated to take account of an expansion of the calculation basis. (3) Specific emissions are calculated considering total emissions from thermal generation as a ratio of total renewable, nuclear and thermal generation (including the contribution of heat). (4) The calculation does not consider Italian O&G plants being decommissioned or of marginal impact. In addition, the figures do not take account of consumption and generation for cogeneration relating to Russian thermal generation plants. Average efficiency is calculated on the basis of the plant fleet and is weighted by generation. Performance of the Group 81 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsThe Group’s ambition for leadership in the fight against cli- > the mapping of generation sites in areas at risk of water mate change was further strengthened in 2019: the target for scarcity, i.e. where the average availability of per capita wa- the reduction of direct emissions from generation by 2020, which was set in 2015 at 350 g/kWheq of CO2 with a 25% re- duction compared with 2007, was achieved one year early. In ter resources is below the benchmark level set by the FAO (the mapping is performed using the Global Water Tool of the World Business Council for Sustainable Development); fact, 2019 closed with a reduction of 20% compared with the base year, to 296 g/kWheq of CO2. In addition, in 2019 direct emissions of CO2 equivalent (Scope 1) amounted to around 70 million tons equivalent, a decrease of 27% on 2018. The > the identification of “critical” generation sites, i.e. those in water scarcity areas drawing on fresh water; > more efficient management of water resources in order to maximize the use of waste water and sea water. reduction is attributable to a decline in thermal generation About 8% of the Enel Group’s total electricity output uses and the concomitant increase in generation from renewables, fresh water in water-stressed areas. In 2019 the total water which raised the proportion of electricity generated with ze- requirement was 77.3 million cubic meters, some 20% less ro-emissions sourced to 54.9% of total consolidated output in than in 2018, reflecting a decrease in thermal generation 2019 (a significant increase on the 49.1% registered in 2018). compared with the previous year. The specific requirement for 2019 was 0.33 l/kWheq, 13% less than in 2018. Specific atmospheric emissions of SO2 and NOX also declined by about 21% and 17% respectively compared with 2018, as confirmed by emissions of particulates, which declined fur- Preserving biodiversity ther due to a reduction in generation from coal during 2019. Preserving biodiversity is one of the strategic objectives of Responsible water resource management Water is an essential part of electricity generation, and Enel therefore believes that the availability of this resource is a critical part of future energy scenarios. The Group has always managed the water we use efficiently through ongoing moni- toring of all power plants located in areas threatened by water scarcity. Enel employs the following levels of analysis: Enel’s environmental policy. The Group promotes specific projects in the various areas in which we operate in order to help protect local species, their natural habitats, and the lo- cal ecosystems in general. These projects cover a vast range of areas, including: inventory and monitoring; programs to protect specific species; methodological research and other studies; repopulation and reforestation; and the construction of infrastructure supports to promote the presence and activ- ities of various species (e.g. artificial nests along power dis- tribution lines for birds or fish ladders at hydroelectric plants). 82 Consolidated Annual Report 2019Group performance €17,704 mln Gross operating margin +8.3% compared to 2018 €6,878 mln Operating income €9,900 million in 2018 €2,174 mln Group net income -54.6% compared to 2018 €17,905 mln Ordinary gross operating margin +10.8% compared to 2018 €11,096 mln Ordinary operating income of which 30% from Enel Green Power €4,767 mln Group ordinary net income +17.4% compared to 2018 Millions of euro Revenue Costs Net income/(expense) from commodity risk management Gross operating margin Depreciation, amortization and impairment losses Operating income Financial income Financial expense 2019 80,327 61,890 (733) 17,704 10,826 6,878 3,953 6,397 2018 75,575 59,756 532 16,351 6,451 9,900 4,361 6,409 Total net financial income/(expense) (2,444) (2,048) Share of income/(losses) from equity investments accounted for using the equity method Income before taxes Income taxes Net income from continuing operations Net income from discontinued operations Net income (Group and non-controlling interests) Net income attributable to shareholders of Parent Company Net income attributable to non-controlling interests (122) 4,312 836 3,476 - 3,476 2,174 1,302 349 8,201 1,851 6,350 - 6,350 4,789 1,561 Change 4,752 2,134 (1,265) 1,353 4,375 (3,022) (408) (12) (396) (471) (3,889) (1,015) (2,874) - (2,874) (2,615) (259) 6.3% 3.6% - 8.3% 67.8% -30.5% -9.4% -0.2% -19.3% - -47.4% -54.8% -45.3% - -45.3% -54.6% -16.6% Performance of the Group 83 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsRevenue Millions of euro Sale of electricity Transport of electricity Fees from network operators Transfers from institutional market operators Sale of gas Transport of gas Sale of fuels Fees for connection to electricity and gas networks Revenue from construction contracts Sale of commodities under contracts with physical delivery (IFRS 9) Other revenue Total 2019 40,045 10,470 866 1,625 3,294 617 914 785 749 16,294 4,668 80,327 2018 39,278 10,101 1,012 1,711 4,401 576 919 714 735 11,833 4,295 75,575 Change 767 369 (146) (86) (1,107) 41 (5) 71 14 4,461 373 4,752 2.0% 3.7% -14.4% -5.0% -25.2% 7.1% -0.5% 9.9% 1.9% 37.7% 8.7% 6.3% The increase in revenue is largely attributable to the item “Sale ment between Edesur and local authorities settling recip- of commodities under contracts with physical delivery” as a rocal disputes originating in the period from 2006 to 2016 result of reclassifications with no impact on margins. The re- (€233 million); classifications were connected with the application of the IFRIC > the reimbursement envisaged for the exercise of the right Agenda Decision of March 2019 to non-financial transactions of withdrawal by a major industrial customer concerning the with physical delivery measured at fair value in accordance with supply of electricity by Enel Generación Chile (€160 million), IFRS 9. of which €80 million regarding thermal generation and the The additional increase in revenue is attributable to the posi- remaining €80 million concerning renewables generation; tive performance of Infrastructure and Networks, in particular > the adjustment of the price for the acquisition of eMotorW- in Latin America, mainly due to the contribution of Enel Dis- erks in 2017 following application of a number of contractu- tribuição São Paulo in Brazil and the settlement of outstanding al clauses (€98 million); regulatory items in Argentina, and to Thermal Generation and > the fee of €50 million from the agreement reached by e-dis- Trading in Italy, reflecting in particular an increase in trading tribuzione with F2i and 2i Rete Gas for the early all-inclu- activities. These effects were only partially offset by lower sive settlement of the second indemnity connected with revenue from on End-user Markets in Spain and Italy and by the disposal in 2009 of the interest held by e-distribuzione adverse exchange rate developments. in Enel Rete Gas. Other revenue recognized in 2019 included: In 2018, that item had mainly comprised: > the gain on the sale of Mercure Srl, a special purpose ve- > the gain and the re-measurement at fair value totaling €190 hicle to which Enel Produzione had previously transferred million connected with the sale of eight companies involved the Valle del Mercure biomass plant (€108 million); in Project Kino in Mexico at the end of September 2018; > the negative goodwill (€181 million) deriving from the > the indemnity of €128 million received in connection with definitive allocation of the purchase price of (i) a number the agreement of e-distribuzione for the sale of Enel Rete of companies sold by Enel Green Power North Ameri- Gas in 2009; ca Renewable Energy Partners LLC (€106 million) and (ii) > the gain of €65 million on the sale of EF Solare Italia; Tradewind, which went from being an associate to a whol- > the gain of €18 million on the sale of a number of renew- ly-owned subsidiary (negative goodwill of €75 million); ables companies in Uruguay. > the gain of €42 million on the sale of Gratiot and Outlaw, two renewables projects developed by Tradewind; > an increase in revenue in Argentina following the agree- 84 Consolidated Annual Report 2019Costs Millions of euro Electricity purchases Consumption of fuel for electricity generation Fuel for trading and gas for sale to end users Materials Personnel Services, leases and rentals (1) Other operating expenses Capitalized costs Total 2019 20,449 4,228 9,284 2,110 4,634 16,264 7,276 (2,355) 61,890 2018 19,802 4,920 12,783 1,911 4,581 16,254 1,769 (2,264) 59,756 Change 647 (692) (3,499) 199 53 10 5,507 (91) 2,134 3.3% -14.1% -27.4% 10.4% 1.2% 0.1% - -4.0% 3.6% (1) Of which costs for fixed water diversion fees of €171 million in 2019 (€167 million in 2018) and costs for public land usage fees of €26 million in 2019 (€24 million in 2018). The increase in costs is mainly attributable to the application income statement items with no impact on margins. of the IFRIC Agenda Decision of March 2019 to non-financial Please see the notes to the consolidated financial statements transactions with physical delivery measured at fair value in for more details on costs for the year. accordance with IFRS 9, which involved reclassifications of Gross operating margin The following table reports developments in the gross operating margin by business area: Millions of euro Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Other, eliminations and adjustments Total 2019 1,395 4,604 8,278 3,287 158 126 (144) 17,704 2018 1,117 4,608 7,539 3,079 124 85 (201) Change 278 (4) 739 208 34 41 57 16,351 1,353 24.9% -0.1% 9.8% 6.8% 27.4% 48.2% 28.4% 8.3% The rise in the gross operating margin despite adverse ex- dition, in 2019 e-distribuzione recognized additional indem- change rate developments (especially in Latin America) mainly nities of €50 million connected with the disposal to F2i of reflects: Enel Rete Gas; in 2018 those indemnities had amounted to > Infrastructure and Networks operations in Latin America €128 million; (€496 million), mainly due to the change in the scope of > Thermal Generation and Trading in Spain (€165 million) and consolidation with the acquisition of Enel Distribuição São Latin America (€173 million), due respectively to (i) the sus- Paulo, income from the agreement between Edesur and pension of taxes on thermal and nuclear generation as well the Argentine government settling reciprocal disputes from as an increase in the margin of nuclear plants, which made the period from 2006 to 2016 and in Italy (€227 million), up the shortfall caused by the significant decrease in hydro mainly due to a decrease in compliance costs connected output due to poor water conditions in 2019 and (ii) the im- with the purchase of energy efficiency certificates. In ad- provement in margins posted by the Fortaleza plant in Bra- Performance of the Group 85 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementszil, mainly reflecting a decline in provisioning costs and the which more than offset the decline in quantities sold; effect of the renegotiation of a supply contract between > Enel X, thanks to the adjustment of the price for the acqui- Enel Generación Chile and its customer Anglo American sition of eMotorWerks in 2017, as noted for revenue (€98 following payment of an indemnity of €80 million. In ad- million). dition, writedowns totaling €308 million were recognized The Enel Green Power Business Line posted a gross operat- on inventories of spare parts and fuels held by coal-fired ing margin in line with the previous year, as the income re- plants in Italy and Spain for which impairment losses were corded in North America for the negative goodwill following recognized. This was partially offset in Italy by the gain on the purchase of a number of companies of Enel Green Power the disposal of Mercure Srl by Enel Produzione, which net North America Renewable Energy Partners (EGPNA REP) and of transaction costs amounted to €94 million; Tradewind, the capital gains from the sales of Gratiot and Out- > End-user Markets in Latin America (€85 million), mainly due law and the higher average prices applied to electricity sales to the impact of the acquisition of Enel Distribuição São Pau- in Italy were essentially offset by the gains recorded in 2018 lo, and in Italy (€81 million), due to greater operating efficien- on the sale of a number of Mexican companies (Project Kino) cy linked especially to lower electricity provisioning costs, and the sale of EF Solare Italia. Ordinary gross operating margin Millions of euro 2019 Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Other, eliminations and adjustments Total Gross operating margin 1,395 4,604 8,278 3,287 158 126 (144) 17,704 Indemnity from disposal of interest in Enel Rete Gas Adjustment to fair value of purchase price of a number of Greek companies Writedown of fuel and spare parts inventories of a number of coal-fired plants in Italy and in Spain (1) Writedown of Reftinskaya coal-fired plant in Russia Disposal of interest in Mercure Srl - - 308 7 (94) - 30 - - - (50) - - - - - - - - - - - - - - - - - - - - - - - (50) 30 308 7 (94) Ordinary gross operating margin 1,616 4,634 8,228 3,287 158 126 (144) 17,905 (1) The writedown of fuel and materials/spare parts inventories is not considered ordinary because it was connected with the impairment recognized for a number of coal-fired plants in Italy and Spain. 86 Consolidated Annual Report 2019Millions of euro 2018 Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Other, eliminations and adjustments Total Gross operating margin 1,117 4,608 7,539 3,079 124 85 (201) 16,351 Indemnity from disposal of interest in Enel Rete Gas Gain on sale of EF Solare Italia - - - (65) (128) - - - - - - - - - (128) (65) Ordinary gross operating margin 1,117 4,543 7,411 3,079 124 85 (201) 16,158 Operating income Millions of euro Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Other, eliminations and adjustments Total 2019 (3,494) 3,276 5,277 2,163 (98) (75) (171) 6,878 2018 (118) 3,505 4,787 1,958 19 (38) (213) 9,900 Change (3,376) (229) 490 205 (117) (37) 42 (3,022) - -6.5% 10.2% 10.5% - -97.4% 19.7% -30.5% The decrease in operating income reflected an increase in depreciation, amortization and impairment losses of €4,375 million, despite the improvement in the gross operating mar- ty (the capacity market) narrowed the future scope for using plants with higher levels of CO2 emissions, providing for the exclusion of coal-fired plants from the electricity market. For gin. The increase in depreciation, amortization and impair- these reasons, the carrying amount of a number of coal-fired ment losses reflected the writedowns in 2019 of a number of plants in Italy and Spain, including dismantling charges, was coal-fired plants in Italy, Spain, Chile and Russia, which led to written down by a total of €3,527 million. the recognition of impairment losses totaling €4,010 million. More specifically, in the 1st Half of 2019 two plants in Chile The change in operating income also includes the depreci- were written down by €356 million, reflecting in part the ef- ation charges on rights of use over leased assets, which as fect of the agreement with the Chilean government on their from January 1, 2019 are recognized as leased property, plant early closure, while in Russia writedowns reflected the sale and equipment and depreciated over the term of the associ- of the Reftinskaya coal-fired plant, which at June 30, 2019 had ated leases in application of IFRS 16 (€203 million), and the been classified as held for sale and its value adjusted (€127 writedown of the receivable for the Funac by the Brazilian dis- million) to take account of the sale price. In the 3rd Quar- tribution company Enel Distribuição Goiás in the amount of ter of 2019, the adverse developments in conditions in Spain €96 million. associated with the deterioration in commodity prices and the operation of the CO2 emission market, compromised the competitiveness of coal-fired plants. In Italy, in addition to the These factors were partly offset by the writeback of €265 mil- lion recognized in respect of gas-fired plants in Italy following deterioration in market conditions, the implementation of the impairment testing. new system for remunerating generation capacity availabili- Performance of the Group 87 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements Ordinary operating income Millions of euro 2019 Operating income (3,494) Thermal Generation and Trading Enel Green Power 3,276 Infrastructure and Networks End-user Markets Enel X Services Other, eliminations and adjustments 5,277 2,163 (98) (75) (171) Indemnity from disposal of interest in Enel Rete Gas Disposal of interest in Mercure Srl Writedown of fuel and spare parts inventories of a number of coal-fired plants in Italy and in Spain (1) Writedown of a number of coal- fired plants in Italy Writedown of a number of coal- fired plants in Spain Revaluation of a number of gas- fired plants in Italy Writedown of a number of coal- fired plants in Chile Writedown of Reftinskaya coal- fired plant in Russia Writedown of a number of renewables projects in Italy and North America Writedown of Funac receivable of Enel Distribuição Goiás Writedown of certain intangible assets of Enel X North America Writedown of certain assets of Enel Italia Adjustment of purchase price of a number of Greek companies - (94) 308 1,936 1,591 (265) 356 134 - - - - - - - - - - - - - 70 - - - 30 (50) - - - - - - - - 96 - - - - - - - - - - - - - - - - - - - - - - - - - - 77 - - - - - - - - - - - - - 29 - - - - - - - - - - - - - - Total 6,878 (50) (94) 308 1,936 1,591 (265) 356 134 70 96 77 29 30 Ordinary operating income 472 3,376 5,323 2,163 (21) (46) (171) 11,096 (1) The writedown of fuel and materials/spare parts inventories is not considered ordinary because it was connected with the impairment recognized for a number of coal-fired plants in Italy and Spain. 88 Consolidated Annual Report 2019 Millions of euro 2018 Thermal Generation and Trading (118) Enel Green Power 3,505 Infrastructure and Networks End-user Markets Enel X Services Other, eliminations and adjustments 4,787 1,958 19 (38) (213) Operating income Indemnity from disposal of Enel Rete Gas Gain on sale of EF Solare Italia Writedown of Alcúdia plant (Spain) Reversal of impairment on EGP Hellas CGU and impairment of wind projects (Cyclades islands) Writedown of Nuove Energie CGU Net writedown of biomass and solar plants in Italy Ordinary operating income - - 82 - 27 - (9) - (65) - (117) - 94 (128) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 3,417 4,659 1,958 19 (38) (213) 9,793 Total 9,900 (128) (65) 82 (117) 27 94 Group net income > the recognition of prepaid taxes in 2018 on prior-year loss- es by Enel Distribuição Goiás (€274 million) and Enel Green Group net income for 2019 amounted to €2,174 million, com- Power SpA due to the merger with 3Sun (€85 million); pared with €4,789 million the previous year. The decrease in > non-controlling interests, which benefitted from an im- operating income discussed above was accompanied by: provement in net income as a ratio of pre-tax income in > the effects of the repurchase in March 2019 of control of the two years under review, reflecting in particular the im- 13 companies from EGPNA REP, which led to a change in pairment recognized on the wholly-owned subsidiary Enel the scope of consolidation and the recognition of a capital Produzione. loss by EGPNA REP; These effects were partially offset by the reversal of deferred > the recognition in 2018 of (i) the reversal of impairment of tax liabilities of Enel Distribuição São Paulo following the the financial receivable arising following the sale of 50% merger with Enel Brasil Investimentos Sudeste SA (“Enel of Slovak Power Holding for €186 million and (ii) the pos- Sudeste”) in the amount of €494 million. itive adjustment of the fair value of that receivable in the amount of €134 million; Group net ordinary income in 2019 amounted to €4,767 mil- > the writedown of a financial receivable in Spain in the lion (€4,060 million in 2018), an increase of €707 million com- amount of €21 million associated with the Litoral coal-fired pared with 2018. The following table provides a reconciliation plant, which underwent impairment testing; of Group net income with Group net ordinary income, indi- > the revaluation in 2018 of the assets of the equity invest- cating the non-recurring items and their respective impact on ment measured using the equity method of Slovak Power performance, net of the associated tax effects and non-con- Holding in the amount of €362 million and the writedown trolling interests. in 2019 of the same equity investment in the amount of €34 million; Performance of the Group 89 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements Millions of euro Group net income Indemnity from disposal of interest in Enel Rete Gas Disposal of interest in Mercure Srl Writedown of certain assets held by Slovak Power Holding Writedown of fuel and spare parts inventories of a number of coal-fired plants in Italy and in Spain Writedown of a number of coal-fired plants in Italy Writedown of a number of coal-fired plants in Spain Revaluation of a number of gas-fired plants Italy Writedown of a number of coal-fired plants in Chile Writedown of Reftinskaya coal-fired plant in Russia Writedown of Funac receivable of Enel Distribuição Goiás Writedown of certain intangible assets of Enel X North America Writedown of certain assets of Enel Italia and Enel Green Power Writedown of assets of a number of wind and hydro projects in North America Adjustment of purchase price of a number of Greek companies Writedown of Alcúdia plant (Spain) Reversal of impairment on EGP Hellas CGU and impairment of wind projects (Cyclades islands) Gain on sale of EF Solare Italia Writedown of Nuove Energie CGU Writedown of biomass and solar plants in Italy Group ordinary net income (1) (1) Taking account of tax effects and non-controlling interests. 2019 2,174 (49) (97) 38 203 1,400 849 (188) 151 60 38 77 50 31 30 - - - - - 4,767 2018 4,789 (128) - (646) - - - - - - - - - - - 43 (39) (64) 20 85 4,060 90 Consolidated Annual Report 2019 Analysis of the Group’s financial position and financial structure €92,113 mln Net capital employed €88,941 million at December, 31 2018 €45,175 mln Net financial debt +9.9% compared to 2018 +22% Sustainable financing/Total gross debt €61,547 million €9,947 mln Total capital expenditure of which 43.2% in renewables Analysis of the Group’s financial position Millions of euro Net non-current assets: - property, plant and equipment and intangible assets - goodwill - equity investments accounted for using the equity method - other net non-current assets/(liabilities) Total net non-current assets Net current assets: - trade receivables - inventories - net receivables due from institutional market operators - other net current assets/(liabilities) - trade payables Total net current assets Gross capital employed Provisions: - employee benefits - provisions for risks and charges and net deferred taxes Total provisions Net assets held for sale Net capital employed Total shareholders’ equity Net financial debt at Dec. 31, 2019 at Dec. 31, 2018 Change 99,010 14,241 1,682 (5,022) 109,911 13,083 2,531 (3,775) (7,282) (12,960) (8,403) 101,508 (3,771) (5,722) (9,493) 98 92,113 46,938 45,175 95,780 14,273 2,099 (5,696) 3,230 (32) (417) 674 106,456 3,455 3.4% -0.2% -19.9% 11.8% 3.2% 13,587 2,818 (504) (287) -3.7% -10.2% (3,200) (575) -18.0% (7,589) (13,387) (7,771) 98,685 (3,187) (6,838) (10,025) 307 427 (632) 2,823 (584) 1,116 532 4.0% 3.2% -8.1% 2.9% -18.3% 16.3% 5.3% 281 (183) -65.1% 88,941 47,852 41,089 3,172 (914) 4,086 3.6% -1.9% 9.9% Analysis of the Group’s financial position and financial structure 91 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsProperty, plant and equipment and intangible assets in- The change in goodwill mainly reflects the writedown of cer- creased, essentially reflecting investment in the period tain assets of a project company in North America, as the (€9,255 million), changes in the scope of consolidation project will no longer be pursued. (€1,192 million), largely due to the acquisition of control of a number of companies of EGPNA REP that had previous- Net assets held for sale mainly regard the value of a number ly been accounted for using the equity method, the consol- of hydro companies accounted for using the equity method idation of Tradewind Energy and the acquisition of YouSave. held by EGPNA (now Enel North America) and the Rionegro Other factors included the adjustment of the carrying amount plant in Colombia, while as noted above the Reftinskaya GRES (including dismantling charges) of the Bocamina I and Tara- coal-fired plant was sold during the 4th Quarter of 2019. pacá plants in Chile and a number of plants in Italy and Spain (€762 million) and the effects of accounting for hyperinfla- Net capital employed at December 31, 2019 amounted to tion. These factors were partly offset by adverse exchange €92,113 million and was funded by shareholders’ equity at- rate developments (€607 million), mainly in Latin America, by tributable to the shareholders of the Parent Company and depreciation, amortization and impairment losses of €9,535 non-controlling interests in the amount of €46,938 million and million for the year, and by the sale of the Reftinskaya GRES net financial debt of €45,175 million. At December 31, 2019, coal-fired plant to JSC Kuzbassenergo. the debt/equity ratio was 0.96 (0.86 at December 31, 2018). 92 Consolidated Annual Report 2019Analysis of the Group’s financial structure Net financial debt Net financial debt and changes in the period are detailed in the table below. Millions of euro Long-term debt: - bank borrowings - bonds - other borrowings Long-term debt Long-term financial receivables and securities Net long-term debt Short-term debt Bank borrowings: - short-term portion of long-term bank borrowings - other short-term bank borrowings Short-term bank borrowings Bonds (short-term portion) Other borrowings (short-term portion) Commercial paper Cash collateral on derivatives and other financing Other short-term financial payables (1) Other short-term debt Long-term financial receivables (short-term portion) Financial receivables - cash collateral Other short-term financial receivables Cash and cash equivalents with banks and short term securities Cash and cash equivalents and short-term financial receivables Net short-term debt NET FINANCIAL DEBT Net financial debt of “Assets held for sale” (1) Includes current financial payables included in Other current financial liabilities. at Dec. 31, 2019 at Dec. 31, 2018 Change 8,407 43,294 2,473 54,174 (3,185) 50,989 1,121 579 1,700 1,906 382 2,284 750 351 5,673 (1,585) (2,153) (369) (9,080) (13,187) (5,814) 45,175 - 8,819 (412) -4.7% 38,633 4,661 12.1% 1,531 48,983 (3,272) 942 61.5% 5,191 10.6% 87 2.7% 45,711 5,278 11.5% 1,830 (709) -38.7% 512 2,342 1,341 196 67 13.1% (642) -27.4% 565 186 42.1% 94.9% 2,393 (109) -4.6% 301 438 449 (87) - -19.9% 4,669 1,004 21.5% (1,522) (2,559) (859) (63) 406 490 -4.1% 15.9% 57.0% (6,693) (2,387) -35.7% (11,633) (1,554) -13.4% (4,622) (1,192) -25.8% 41,089 4,086 9.9% 362 (362) - Analysis of the Group’s financial position and financial structure 93 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNet financial debt amounted to €45,175 million at Decem- At December 31, 2019, gross financial debt amounted to ber 31, 2019, an increase of €4,086 million compared with €61,547 million, an increase of €5,553 million on the previous December 31, 2018, due mainly to the increase in bond is- year. sues and other borrowings, only partly offset by changes in cash holdings and financial receivables. Gross financial debt Millions of euro Gross financial debt of which: - debt connected with achievement of SDGs Debt connected with achievement of SDGs/Total gross financial debt (%) Gross long-term debt at Dec. 31, 2019 Gross short-term debt 57,583 3,964 Gross long-term debt at Dec. 31, 2018 Gross short-term debt 52,350 3,644 Gross debt 61,547 13,758 - 13,758 8,535 - 22% Gross debt 55,994 8,535 15% More specifically, gross long-term debt (including the short- − a credit facility of €1,000 million obtained on October term portion) amounted to €57,583 million, of which €13,758 2, 2019 by Enel SpA linked to the achievement of the million in respect of financing connected with achievement of United Nations Sustainable Development Goals; SDGs. It breaks down as follows: − a credit line of $220 million (equivalent to €196 million) > bonds in the amount of €45,200 million, of which €7,260 and a loan of $340 million (equivalent to €303 million) ob- million in respect of sustainable bonds. More specifically, tained on November 20, 2019 by Enel Finance America bonds increased by a total of €5,226 million compared with linked to the achievement of the United Nations’ Sustain- December 31, 2018, mainly reflecting the following sus- able Development Goals; tainable issues of Enel Finance International: > other borrowings of €2,855 million, which increased by €1,128 − €1,000 million in respect of a fixed-rate green bond, is- million due to the application of the IFRS 16 on leases. sued in January 2019 and maturing in 2025; − $1,500 million (equivalent to €1,336 million) in respect Gross short-term financial debt amounted to €3,964 million, of a bond issue in September 2019 and maturing in Sep- decreasing by €320 million compared with December 31, 2018. tember 2024, linked to the Group’s ability to achieve a It consists mainly of commercial paper in the amount of €2,284 certain percentage of installed renewables capacity by million and cash collateral on derivatives and other financing to- December 31, 2021 (SDG 7); taling €750 million. − €2,500 million in respect of multi-tranches bond issues in October 2019 and maturing in 2024, 2027 and 2034, Cash and cash equivalents and short- and long-term financial linked to the Group’s ability to achieve a certain percen- receivables came to €16,372 million, an increase of €1,467 tage of installed renewables capacity (SDG 7) and to million compared with the end of 2018, mainly due to the reduce direct greenhouse gas emissions (SDG 13); increase in cash held at banks and short-term securities in > bank borrowings of €9,528 million, of which €6,498 in re- the amount of €2,387 million, only partly offset by declines in spect of sustainable loans. The aggregate decreased by cash collateral paid to counterparties and in other short-term €1,121 million compared with the previous year, mainly re- financial receivables in the amount of €406 million and €489 flecting repayments during the year. million, respectively. The following sustainable credit facilities were obtained in 2019, on which no drawings were outstanding at Decem- ber 31, 2019: 94 Consolidated Annual Report 2019Cash flows Millions of euro Cash and cash equivalents at the beginning of the year (1) Cash flows from operating activities Cash flows from investing/disinvesting activities Cash flows from financing activities Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the year (2) 2019 6,714 11,251 (9,115) 306 (76) 9,080 2018 7,121 11,075 (9,661) (1,636) (185) 6,714 Change (407) 176 546 1,942 109 2,366 (1) Of which cash and cash equivalents equal to €6,630 million at January 1, 2019 (€7,021 million at January 1, 2018), short-term securities equal to €63 million at January 1, 2019 (€69 million at January 1, 2018) and cash and cash equivalents pertaining to assets held for sale in the amount of €21 million at January 1, 2019 (€31 million at January 1, 2018). (2) Of which cash and cash equivalents equal to €9,029 million at December 31, 2019 (€6,630 million at December 31, 2018), short-term securities equal to €51 million at December 31, 2019 (€63 million at December 31, 2018) and cash and cash equivalents pertaining to assets held for sale in the amount of €21 mil- lion at December 31, 2018. Cash flows from operating activities in 2019 were a positive REP joint venture, which holds a number of renewable energy €11,251 million, an increase of €176 million compared with the project development companies (the Athena operation). previous year, mainly reflecting the improvement in the gross operating margin, partly offset by the increase in cash require- Cash flows from financing activities generated an increase ments connected with the change in net current assets. in liquidity in the amount of €306 million, while in 2018 they showed cash absorption of €1,636 million. The flow in 2019 is Cash flows from investing/disinvesting activities in 2019 essentially associated with: absorbed funds in the amount of €9,115 million, while in 2018 > the increase in net financial debt (the net balance of repay- they had absorbed liquidity totaling €9,661 million. Capital ex- ments and new borrowing) in the amount of €3,743 million; penditure by Business Line is reported in the next section. > the payment of dividends totaling €3,957 million; Investments in entities (or business units) less cash and cash > transactions in non-controlling interests amounting to €530 equivalents acquired amounted to €692 million and were million, mainly regarding the increase in the interest in Enel mainly accounted for by the acquisition through Enel Green Américas under a number of share swap contracts with a Power North America (EGPNA, now renamed Enel North financial institution, which increased the stake from 51.8% America), of 100% of seven renewables plants previously to 59.97%, and the non-proportional capital increase in the held by Enel Green Power North America Renewable Energy subsidiary. Partners (EGPNA REP), a joint venture held equally by EGPNA and General Electric Capital’s Energy Financial Services. In 2019, cash flows from operating activities in the amount of Disposals of entities and business units, net of cash and cash €11,251 million more than offset the cash needs for investing equivalents sold, generated cash flows of €320 million. They activities totaling €9,115 million. mainly regarded the disposal of 100% of three solar plants in The Group also made greater recourse to external sources Brazil, the disposal of the business unit comprising the Mer- of financing in order to benefit from favorable market condi- cure biomass generation plant and the disposal by EGPNA tions, creating a substantial liquidity buffer for use in future (now Enel North America) of 30% of its stake in the EGPNA operations. Analysis of the Group’s financial position and financial structure 95 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsCapital expenditure Millions of euro Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Other, eliminations and adjustments Total 2019 851 4,293 (1) 3,905 449 270 134 45 2018 839 2,784 (2) 3,830 374 183 106 36 Change 12 1,509 75 75 87 28 9 9,947 8,152 1,795 1.4% 54.2% 2.0% 20.1% 47.5% 26.4% 25.0% 22.0% (1) The figure does not include €4 million regarding units classified as “held for sale”. (2) The figure does not include €378 million regarding units classified as “held for sale”. Capital expenditure increased by €1,795 million compared plants in Spain, the United States, Canada, South Africa and with 2018, mainly reflecting investment in wind and solar Brazil. 96 Consolidated Annual Report 2019Enel shares Enel and the financial markets Gross operating margin per share (euro) Operating income per share (euro) Group net earnings per share (euro) Group net ordinary earnings per share (euro) Dividend per share (euro) (1) Group shareholders’ equity per share (euro) Share price - 12-month high (euro) Share price - 12-month low (euro) Average share price in December (euro) Market capitalization (millions of euro) (2) No. of shares outstanding at December 31 (millions) (3) 2019 1.74 0.68 0.21 0.47 0.328 2.99 7.21 5.08 6.89 70,047 10,165 2018 1.61 0.97 0.47 0.40 0.28 3.12 5.39 4.24 4.94 50,254 10,167 (1) Dividend resolved by the Shareholders’ Meeting of May 14, 2020. (2) Calculated on average share price in December. (3) The change is due to the purchase of 1,549,152 treasury shares with a par value of €1.00 each Enel stock weighting in: - FTSE-MIB index - FTSE-MIB index Rating Current (1) at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2017 16.40% 4.46% 15.04% 4.21% 13.86% 3.78% 11.68% 3.92% Outlook STABLE STABLE STABLE STABLE Standard & Poor’s Medium/long-term Short-term Outlook Moody’s Medium/long-term Short-term Outlook Medium/long-term Short-term Fitch (1) Figures updated to January 28, 2020. BBB+ A-2 BBB+ A-2 BBB+ A-2 BBB+ A-2 POSITIVE POSITIVE STABLE STABLE Baa2 - Baa2 - Baa2 - Baa2 P2 STABLE STABLE STABLE STABLE A- F2 A- F2 BBB+ F2 BBB+ F2 Global economic conditions were weak in 2019, continuing Among other key developments, 2019 was marked by a fur- the slowdown that began in the 2nd Half of 2018. The trade ther deceleration in the Chinese economy and the tightening tensions between the United States and China (with the con- of financial conditions in the United States (the consequence sequent introduction of new tariffs), geopolitical strains, and of the premature start to the normalization of interest rates the persistent uncertainty about the outcome of the Brexit by the Federal Reserve towards the end of 2018), which negotiations all impacted investment decisions. slowed the rapid pace of growth in that country. Enel shares 97 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsGrowth was modest in the euro area, averaging 0.2% on a dends distributed in 2019 amounted to €0.28 per share, about quarterly basis beginning in the 2nd Quarter of 2019, mainly 18% higher than the €0.237 per share distributed in 2018. due to weaker external demand and the difficulties in manu- With regard to 2019, on January 22, 2020 an interim dividend facturing and the industrial sector in general. of €0.16 was paid, while the balance of the dividend is sche- In Latin America, economic conditions were weak and vari- duled for payment on July 22, 2020. ed, marked by strong political instability (i.e. Argentina, Chile, Peru and Bolivia). The outlook for investors is changing rapidly: the changes The easing of geo-political tensions (with the “phase-one” taking place and the challenges the world presents us today agreement between the United States at the start of 2020 are also impacting the way we invest. Companies are no lon- and the dissipation of the risk of a hard Brexit following the ger seen as closed systems, but rather as open systems that overwhelming victory of the Conservatives in the British generate wealth through interaction with the environment elections), together with the improvement of global financial and the communities in which they operate, and towards conditions (the return of more expansionary monetary poli- which they are accountable. In this context, Enel’s pursuit cies in both the mature and emerging economies), strengthe- of a strategy aimed at creating value through decarboniza- ned optimism at the start of the year concerning the pace tion and seizing the opportunities offered by electrification of global economic recovery. However, the outbreak of the has been understood and appreciated by institutional inve- COVID-19 epidemic in China and the subsequent escalation stors, whose stake in Enel at December 31, 2019 reached an of new infections in Italy in the early months of the year have all-time high of 60.3% (compared with 57.6% at December radically changed the situation. To date, significant but tem- 31, 2018), while the share of individual investors has fallen to porary and limited economic damage is forecast in the 1st 16.1% (compared with 18.8% at December 31, 2018). The Half of the year, mainly for economies with strong econo- interest of the Ministry for the Economy and Finance was mic ties with China and those that have taken stringent pre- unchanged at 23.6%. cautionary measures to contain the spread of the virus (with The number of Environmental, Social and Governance (ESG) restrictions on the circulation of people and activities). The investors continued to rise steadily: at December 31, 2019, coming months will offer a more certain picture of the eco- social responsible investors (SRIs) held about 10.8% of sha- nomic consequences of the outbreak and the repercussions re capital (against 10.5% at December 31, 2018), while inve- on the financial markets. stors who have signed the Principles for Responsible Invest- ment represent 43% of share capital (39.1% at December Despite the uncertainty in the economic environment, the 31, 2018). main European equity indices posted gains for 2019. Spain’s Ibex35 posted a gain of 11.8%, while France’s CAC40 rose For further information we invite you to visit the Investor Re- 26.4% and Germany’s DAX30 increased by 25.5%. lations section of our corporate website (http://www.enel. The FTSE Italy All-Share registered a gain of 27.2%. com/investors) and download the Enel Investor app, which contains financial data, presentations, real-time updates of The euro-area utilities segment closed the year up 22.2%. the share price, information on the composition of corporate bodies and the rules of shareholders’ meetings, as well as With regard to Enel shares, 2019 ended with the stock price periodic updates on corporate governance issues. at €7.072, up 40.2% on the previous year, nearly double the performance of the sector index for the euro area. We have also created contact centers for private investors (whi- ch can be reached by phone at +39-0683054000 or by e-mail On January 23, 2019 Enel paid an interim dividend of €0.14 per at azionisti.retail@enel.com) and for institutional investors (pho- share from 2018 profits and on July 24, 2019, it paid the balance ne: +39-0683051; e-mail: investor.relations@enel.com). of the dividend for that year in the amount of €0.14. Total divi- 98 Consolidated Annual Report 2019Performance of Enel share price and the Bloomberg World Electric, Euro STOXX Utilities and FTSE Italy All-Share indices from January 1, 2019 to January 31, 2020 €9.0 €8.5 €8.0 €7.5 €7.0 €6.5 €6.0 €5.5 €5.0 €4.5 €4.0 €3.5 €3.0 €5.044 €7.855 €6.690 €6.332 €6.033 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2019 2020 Enel Bloomberg World Electric Euro STOXX Utilities FTSE Italy All-Share Source: Bloomberg. Enel shares 99 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsPeople centricity People management, development and motivation The Enel Group workforce at December 31, 2019 numbered (a total of +75), which included the disposal of the Mercure 68,253 (down 1,019 compared with December 31, 2018). The plant by Enel Produzione in Italy, the acquisition in March of contraction in the Group workforce reflects the impact of Tradewind in the United States, the disposal of the Reftin- the balance between new hires and terminations during the skaya GRES plant in Russia and the acquisition of PayTipper period (-1,094) and the change in the scope of consolidation Network Srl, FlagPay Srl and PayTipper in Italy. at Dec. 31, 2019 at Dec. 31, 2018 9,432 7,957 34,822 6,336 2,808 6,013 885 68,253 10,286 7,478 35,740 6,492 2,733 5,646 897 69,272 69,272 3,726 (4,820) 75 68,253 No. Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Other Total Change in workforce No. Balance at December 31, 2018 Hirings Terminations Change in the scope of consolidation Balance at December 31, 2019 100 Consolidated Annual Report 2019Breakdown of changes in workforce Hiring rate New hires by gender: - of which men - of which women New hires by age group: - <30 - 30-50 - >50 New hires by geographical area: - Italy - Iberia - Latin America - Europe and Euro-Mediterranean Affairs - North America - Africa, Asia and Oceania Turnover rate Terminations by gender: - of which men - of which women Terminations by age group: - <30 - 30-50 - >50 Terminations by geographical area: - Italy - Iberia - Latin America - Europe and Euro-Mediterranean Affairs - North America - Africa, Asia and Oceania no. % no. % no. % no. % no. % no. % no. % no. % no. % no. % no. % no. % no. % no. % no. % no. % no. % no. % no. % no. % no. % no. % 2019 5.5% 3,726 2,702 72.5% 1,024 27.5% 3,726 1,865 50.1% 1,698 45.6% 163 4.4% 3,726 1,042 28.0% 430 11.5% 1,098 29.5% 528 14.2% 435 11.7% 193 5.2% 7.1% 4,820 3,766 78.1% 1,054 21.9% 4,820 626 13.0% 1,867 38.7% 2,327 48.3% 4,820 1,607 33.3% 254 5.3% 2,103 43.6% 369 7.7% 392 8.1% 95 2.0% 2018 4.9% 3,414 2,410 70.6% 1,004 29.4% 3,414 1,622 47.5% 1,628 47.7% 164 4.8% 3,414 796 23.3% 425 12.5% 1,182 34.6% 345 10.1% 594 17.4% 72 2.1% 6.9% 4,746 3,846 79.8% 900 18.7% 4,746 499 10.4% 1,532 31.8% 2,715 56.3% 4,746 1,668 34.6% 425 8.8% 1,862 38.6% 384 8.0% 374 7.8% 33 0.7% Change 11.6% 9.1% 12.1% 2.7% 2.0% -6.6% 9.1% 15.0% 5.4% 4.3% -4.5% -0.6% -9.2% 9.1% 30.9% 20.0% 1.1% -7.4% -7.1% -14.9% 53.0% 40.2% -26.8% -32.9% - - 3.1% 1.6% -2.1% -2.1% 17.1% 17.1% 1.6% 25.5% 25.5% 21.9% 21.9% -14.3% -14.3% -3.7% -3.7% -40.3% -40.3% 12.9% 12.9% -3.9% -3.9% 4.8% 4.8% - - 0.6 312 292 1.9 20 -1.9 312 243 2.6 70 -2.1 (1) -0.4 312 246 4.7 5 -0.9 (84) -5.1 183 4.1 (159) -5.7 121 3.1 0.02 74 (80) -1.7 154 3.2 74 127 2.6 335 7.0 (388) -8.1 (61) -1.3 (171) -3.5 241 5.0 (15) -0.3 18 0.4 62 1.3 People centricity 101 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements The energy transition is opening new horizons for the Group, Enel is going beyond the traditional concept of training, stimu- not only for the business but above all for the people who work lating the individual’s ability to undertake a learning path accor- for us. In this context, Enel has begun specific upskilling and ding to his or her specific needs, passions and aptitudes. In reskilling programs. The former focus on developing existing 2019, more than 2.6 million hours of training were provided, co- professional skills, adding new skills dictated by technology vering managerial, technical, behavioral and language training, and innovative processes. Reskilling, on the other hand, seeks as well as health and safety, skills and digital culture. Enel has to create new job profiles, replacing skills that are becoming also set itself the goal of involving 100% of our employees in obsolete or no longer in demand, and to enable people to tackle digital skills training by 2022; to date we have involved 46% of new activities. Selection, hiring and internal mobility processes our people. therefore play a key role, as do partnerships with universities. Average training hours per employee Average number of training hours Average number of training hours by level: - senior managers - middle managers - office staff - blue collar Average number of training hours by gender: - men - women 2019 38.8 58.4 44.9 29.6 49.6 39.7 35.0 2018 40.2 40.3 42.2 33.5 50.1 41.2 36.2 Change (1.4) -3.5% 18.1 2.7 (3.9) (0.5) (1.5) (1.2) 44.9% 6.5% -11.6% -0.9% -3.5% -3.3% In 2019, the process of evaluating quantitative and qualitati- principle of respect for the inegrity and dignity of the indivi- ve performance involved various levels of the Group’s per- dual in the workplace. Enel’s approach is based on the fun- sonnel in a fluid and comprehensive exchange process. In damental principles, enunciated in the diversity and inclusion 2019, 100% of eligible personnel(1) were involved, of whom policy, of non-discrimination, equal opportunities and human 99% were evaluated. Quantitative appraisals, in turn, were dignity in all its forms, inclusion and promoting work-life ba- conducted for employees with variable remuneration plans, lance. The application of our policies has enabled us to de- which involved the assignment of specific targets. The cor- velop global and local projects to promote diversity in terms porate-climate survey plays an important role within the of gender, age, nationality and disability, and to advance the Company as it enables the identification of areas of improve- culture of inclusion at all levels of the Group and in every si- ment in three key areas – wellness, engagement and safety tuation that can be encountered in the workplace. The impact – and the gathering suggestions on working life issues and of these policies is being monitored on the basis of a detai- aspects. The action plans developed following the 2018 sur- led set of indicators associated with the various actions and vey are being implemented. contexts. More specifically, Enel has set the public objective Enel’s commitment to promoting diversity and inclusion is a of ensuring equal gender representation in the initial stages process that started in 2013 with the adoption of our policy of the selection and recruiting process (about 50% by 2021). on human rights, followed in 2015 by our global diversity and In 2019, in line with the established trajectory, women ac- inclusion policy, In 2019, the global workplace harassment counted for 42% of participants in selection processes, an policy was published. It addresses the issue of sexual haras- increase on the 39% registered in 2018. sment and other forms of harassment, making explicit the (1) Eligible employees: employees who have an open-ended contract and were employed for at least three months in 2019. Provisional figure as the completion of the assessment process has been postponed until May 2, 2020 owing to the COVID-19 emergency. 102 Consolidated Annual Report 2019no. % no. % % % % Diversity and inclusion Workforce by gender: - of which men - of which women Workforce by age group: - <30 - 30-50 - >50 Workforce by level: - manager (%) - middle manager (%) - white collar (%) - blue collar (%) Disabled personnel or personnel belonging the protected categories (%) Women in management positions (no.) 2019 68,253 53,933 79% 14,320 21% 68,253 11.6% 54.6% 33.8% 68,253 2.0% 16.6% 53.1% 28.3% 3.3% 285 2018 69,272 54,972 81% 14,300 21% 69,272 11.8% 57.0% 31.2% 69,272 1.9% 15.9% 50.1% 32.1% 3.2% 265 Change (1,019) (1,039) -2 20 - (1,019) -0.2 -2.4 2.6 (1,019) 0.1 0.7 3.0 -3.8 0.1 20 -1.5% -1.9% -1.9% 0.1% 0.1% -1.5% -1.9% -4.2% 8.4% -1.5% 2.8% 4.6% 6.1% -11.9% 3.2% 7.5% Workplace health and safety > Inter BL Integration, to strengthen the synergy of the actions of the individual Business Lines with the Countries Enel considers employee health, safety and general well- and Regions; being to be its the most valuable asset, one to be preserved > Contractors’ Engagement to improve the safety standards both at work and at home. We are committed to developing of companies that work with Enel. and promoting a strong culture of safety throughout the world in order to ensure a healthy work environment. Quality and Safety is integrated into tender processes, and we closely safety must go hand in hand. All of us are responsible for monitor our contractors’ performance both upstream with our own health and safety and that of the people with whom our qualification system and ongoing as the contracts pro- we interact and, as provided for in the Enel “Stop Work Poli- gress through numerous control processes and tools such as cy”, they are required to promptly report and halt any situation the Supplier Performance Management (SPM) system. Du- of risk or unsafe behavior. The constant commitment of us ring 2019, we prepared the HSE Terms document, attached all, the integration of safety both in our processes and in our to all contracts, which companies must sign when contracts training, the reporting and analysis of near misses, rigor in are awarded. The document, unique for the Group, defines the selection and management of contractors, controls over the requirements regarding health, safety and significant en- quality, the sharing of experience throughout the Group and vironmental aspects that the contractor must comply with benchmarking against the leading international players are all and enforce with their subcontractors during the execution cornerstones of Enel’s culture of safety. of works. In addition, considerable impulse was given to the In 2019 the SHE 2.019 project was launched, continuing the sues to be undertaken at the supplier’s premises and on wor- activities of the SHE 365 project. It involves both the Group’s ksites. The audits are performed during the qualification pha- personnel and suppliers in initiatives concerning safety, health se for each new supplier, in cases where critical issues have and the environment. During last year, this concrete and opera- emerged (severe or fatal injuries) or where the supplier has tional commitment was increasingly focused on the Group’s bu- received a low SPM rating. In 2019, a total of 746 contractor “Safety Supplier Assessment”, specific audits on safety is- siness, strengthening the lines of work along three main lines: assessments were performed. > the Commitment Chain, focusing on preventing severe or fatal injuries; People centricity 103 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsInjury frequency rate (FR) - Enel (1) Fatal injuries at Enel “High consequence” injuries at Enel (2) Fatal injuries at contractors (3) “High consequence” injuries at contractors (2) Unit i no. no. no. no. 2019 0.899 1 3 6 16 2018 0.943 1 5 7 13 Change (0.04) - (2) (1) 3 -4.7% - -40.0% -14.3% 23.1% (1) This index is calculated as the ratio between the number of injuries (all injury events including those with three or fewer missed days of work) and hours wor- ked/1,000,000. (2) Sum of: - injuries that at December 31, 2019 involved more than 6 months of absence from work; - injuries that at December 31, 2019 were still under investigation and are considered serious (initial prognosis > 30 days; - injuries classified as “life changing accidents” (LCA), regardless of the number of missed days of work connected with them. (3) For 2018, considering all the areas in which the Group operates and the activities managed, including companies accounted for using the equity method and companies operating under the BSO (build, sell and operate) model, the number of fatal injuries totaled 8. In 2019, the injury frequency rate (FR) for Enel employees of stress in work situations, also providing recommendations declined to 0.90 injuries for every million hours worked (-5% aimed at promoting a culture of organizational wellbeing. compared with 2018), confirming the effectiveness of the sa- A number of health and safety communication campaigns fety strategy and policies implemented in the Group. were conducted during the year in areas of specific concern In 2019, 1 fatal accident occurred involving an employee of the for the Company, while some 692,000 hours of training were Enel Group, and 6 fatal accidents involving contractors. The provided to Enel personnel. In 2019, innovation projects on causes were mainly associated with mechanical incidents. safety were continued and new initiatives were launched, fo- Also in 2019, 3 “high consequence” accidents occurred in- cusing on prevention and protection measures, the execution volving employees of the Enel Group, and 16 such accidents and analysis of corrective controls, as well as staff training. involving contractors, mainly of a mechanical nature. The Enel Group has established a structured health manage- ment system, based on prevention measures to develop a corporate culture that promotes psycho-physical health, or- Responsible relations with communities ganizational wellbeing and a balance between personal and The energy sector is undergoing a profound transformation professional life. With this in mind, the Group conducts global and our ever greater emphasis on social and environmental and local awareness campaigns to promote healthy lifestyles, factors, together with an inclusive approach, allows us to sponsors screening programs aimed at preventing the onset create long-term value for Enel and for the communities in of diseases and guarantees the provision of medical services. which we operate. This model has been incorporated along More specifically, we have a policy for the prevention of local the entire value chain: analyzing the needs of communities diseases and provide support in the event of diseases or ac- right from the development phases of new activities; taking cidents abroad. A smartphone application has also been in- account of social and environmental factors in the establish- troduced with travel information, a guideline on vaccinations, ment of sustainable worksites; managing assets and plants and a new global insurance policy has been taken out for all to make them sustainable development platforms to the be- employees traveling abroad. Furthermore, the Group constant- nefit of the territories in which they are located. Another de- ly monitors epidemiological and health developments in order velopment was the broadening of this approach in the design, to implement plans for preventive and protective measures development and supply of energy services and products, to preserve the health of its employees and those who work helping to build cities that are increasingly sustainable and for the Group, both locally and globally. In addition, the Enel deploying new technologies. Enel is committed to respecting Group has a systematic and ongoing process for identifying the rights of communities and to contributing to their eco- and assessing work-related stress risks, in accordance with nomic and social development, interacting every day with a the “Stress at Work Prevention and Wellbeing at Work Promo- multitude of stakeholders. In 2019, Enel, with some 1,800 tion” policy, for the prevention, identification and management projects and more than 4 million beneficiaries(2), contributed (2) Beneficiaries are the people for which a project is implemented. Enel only considers direct beneficiaries in the current year. The number of beneficiaries includes the activities and projects carried out in all the areas in which the Group operates (for companies within the scope of the NFS, the number of beneficiaries does not include companies accounted for using the equity method, Group foundations and non-profit organizations and companies operating within the Build, Sell and Operate mechanism). 104 Consolidated Annual Report 2019to the establishment of ecosystems in the countries in which by 2030) and supported quality education (SDG 4), reaching it operates to guarantee access to electricity in rural areas 1.3 million beneficiaries in 2019 (with a target of 2.5 million be- and address inadequate power supplies (SDG 7), reaching neficiaries by 2030). Contributing to this were also more than 7.9 million beneficiaries in 2019 (with a target of 10 million 800 partnerships with local organizations, social enterprises, beneficiaries by 2030); promoted the economic and social de- universities, international associations and non-governmental velopment in the communities (SDG 8), reaching 2.1 million organizations in the various countries. beneficiaries in 2019 (with a target of 8.0 million beneficiaries People centricity 105 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsThe innovation ecosystem For Enel, innovation and digitalization are key pillars of its stra- protagonists of the challenges launched on the site through tegy to grow in a rapidly changing context while ensuring high calls for applications. Activities to promote and develop the safety standards, business continuity and operational efficien- culture of innovation and entrepreneurship within the Com- cy, and thus enabling new uses of energy and new ways of pany also continued through the Innovation Academies and managing it, making it accessible to an ever larger number of the Innovation Ambassadors project. people. Furthermore, in 2019 the activities of the innovation commu- Enel operates through an Open Innovability model, a consen- nities continued, involving different areas and skills within sus-based ecosystem that makes it possible to connect all the Company. Energy storage, blockchain, drones, augmen- areas of the Company with startups, industrial partners, small ted and virtual reality, 3D printing, artificial intelligence, wea- and medium-sized enterprises, research centers and univer- rables, robotics and green hydrogen are the areas and techno- sities through a variety of system, such as crowdsourcing logies addressed within these communities. In recent years, platforms and the Innovation Hub network. Enel has nume- Enel has intensified the use of drones in the monitoring and rous innovation partnership agreements that, in addition to maintenance of its assets, inspecting solar fields, wind far- Enel’s traditional lines of business such as renewables and ms, dams and hydroelectric reservoirs, closed components in conventional generation, have promoted the development traditional plants and distribution lines with the aim of increa- of new solutions for e-mobility, microgrids, energy efficiency sing the efficiency of operational and maintenance processes and the industrial Internet of Things (IoT). During 2019, Enel and above all reduce workers’ exposure to risks. Furthermore, opened 1 new hub in Boston, expanding our presence in the storage systems, in addition to guaranteeing ongoing support leading innovation ecosystems in the world, with 7 Innova- for current business activities, pave the way to new frontiers tion Hubs (Silicon Valley, Boston, Tel Aviv, Madrid, Moscow, of sustainable business. Finally, in 2019 a community was Santiago de Chile and Rio de Janiero) and 3 Innovation Hub born with the aim of applying green hydrogen produced by & Labs (Catania, Pisa and Milan). Thanks to our presence in electrolysis powered by renewable electricity. We consider it innovation ecosystems and the organization of bootcamps, the only way to sustainably produce hydrogen in the long run, scouting initiatives dedicated to specific technologies of in- as it is characterized by zero greenhouse gas emissions and terest to the Group, in 2019 Enel forged contacts with some powered from renewable sources. As of 2019, over €84 mil- 2,500 start-ups. The online crowdsourcing platform Openin- lion have been invested in technological innovation. novability.com is a digital forum where project ideas are the Customer management Our constant focus on the customer and our commitment residential and business markets, the Company confirmed its to delivering high-quality products and services are important focus of the last few years, with dedicated offers with a lower factors that distinguish Enel in the relationship with its custo- environmental impact and a concentration on the most vul- mers in the various countries in which the Group operates. nerable segments of the population. In fact, all the countries Reliable, secure and uninterrupted distribution, together with in which the Group operates provide forms of support (often quality, efficiency and transparency in electricity sales are the linked to government initiatives) which assist these segments hallmark of every phase of our relationship with customers. of the population in paying their electricity and gas bills, so as Enel’s leadership position has been gained thanks to the at- to give everyone equal access to electricity. tention we place on the customer in providing quality ser- Enel has also established numerous processes to ensure cu- vices: aspects that concern more than just the provision of stomers receive a high level of service. In Italy, the commer- electricity and/or natural gas, extending, above all, to intangi- cial quality of all our contact channels (customer service calls, ble aspects of our service that relate to the perception and sa- Enel Points and stores, utility bills, app, e-mail, social media, tisfaction of our customers. Through our products for both the account manager, fax) is ensured through systematic moni- 106 Consolidated Annual Report 2019toring of the sales and management processes in order to systems, boilers, maintenance services, lighting, etc.), go- ensure compliance with applicable laws and regulations and vernment customers (public lighting, monitoring services for respect for the privacy, freedom and dignity of our customers. smart cities, surveillance systems, etc.) and large customers Enel also confirms its interest in digitalization, electronic in- (demand response services, consulting and energy efficiency voicing and new services. With Enel X, we offer innovative solutions). We also promote electric mobility through the de- solutions to residential customers (technological solutions velopment of public and private charging infrastructures. for smart homes, home automation, solar and photovoltaic Sustainable supply chain Enel bases its procurement processes on pre-contractual Vendor management involves three essential stages, which and contractual conduct centered around mutual good faith, integrate social, environmental and governance issues, the transparency and collaboration. In addition to meeting certain qualification system; the definition of general terms and con- quality standards, the services of our vendors must also go ditions of contract and the Supplier Performance Manage- hand in hand with the adoption of best practices in terms of ment (SPM) system in the evaluation process. Enel’s global human rights and working conditions, health and safety and vendor-qualification system (with about 8,200 active qualifi- environmental and ethical responsibility. Our procurement cations as at December 31, 2019) enables us to accurately procedures are designed to guarantee service quality in full assess businesses that intend to participate in tender pro- respect of the principles of economy, effectiveness, timeli- cesses and serves as a guarantee for the Company, while ness, fairness and transparency. The procurement process the SPM system seeks to monitor vendor services in terms plays a central role in value creation in its various forms (sa- of the quality, timeliness and sustainability of contract exe- fety, savings, timeliness, quality, earnings, revenue, flexibility) cution. Furthermore, we continued working on those activi- as a result of ever-greater interaction and integration with the ties that enable the ever-greater integration of environmental, outside world and the different parts of the company organi- social and governance issues in the supply chain strategy, zation. In 2019, we signed agreements with a total of more creating shared value with vendors in a vision of a circular than 30,000 vendors. economy. The innovation ecosystem 107 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsValue created for stakeholders Millions of euro Revenue Income/(Expense) from commodity risk External costs Gross global value added from continuing operations Gross value added from discontinued operations 2019 80,327 (733) 56,022 23,572 23,572 3,050 2,609 4,634 2,069 11,210 2018 75,575 532 53,833 22,274 22,274 2,765 2,493 4,582 3,168 9,266 Gross global value added distributed to: Shareholders Lenders Employees Government Enterprises Enel’s stakeholders are individuals, groups or institutions shared by Enel gives a good indication of how the Group has whose contribution is needed to achieve our mission or who created wealth for the following stakeholders: shareholders, have a stake in its pursuit. The economic value created and lenders, employees and government. 108 Consolidated Annual Report 2019Results by business area The representation of performance by business area presen- re adopted the following reporting sectors: ted here is based on the approach used by management in > Primary sector: business area; monitoring Group performance for the two periods under re- > Secondary sector: geographical area. view, taking account of the operational model adopted by the The business area is therefore the main discriminant in the Group as described above. analyzes performed and decisions taken by the management With regard to disclosures for operating segments, beginning of the Enel Group, and is fully consistent with the internal with the close of the accounts at September 30, 2019, the reporting prepared for these purposes since the results are Enel Group has changed its primary and secondary reporting measured and evaluated first and foremost for each business segments in accordance with the provisions of IFRS 8. Spe- area and only thereafter are they broken down by country. cifically, bearing in mind that in 2019 management began to The following chart outlines these organizational arrange- report performance by business area, the Group has therefo- ments. Holding Regions and Countries Global Business Lines Local Businesses Thermal Generation Trading Enel Green Power Infrastructure and Networks Enel X End-user markets Services Italy Iberia Europe and Euro- Mediterranean Affairs Africa, Asia and Oceania North and Central America Latin America Results by business area 109 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsIn particular, the new organization continues to be based on Costa Rica, Guatemala, El Salvador and Nicaragua, which had matrix of Business Lines (Thermal Generation and Trading, Enel previously been reported in the North and Central America ge- Green Power, Infrastructure and Networks, End-user Markets, ographical area (now renamed North America and consisting Enel X, Services and Holding/Other) and geographical are- of the following countries: United States, Canada and Mexico). as (Italy, Iberia, Europe and Euro-Mediterranean Affairs, Latin In order to ensure full comparability of the figures commen- America, North America, Africa, Asia and Oceania, Central/Hol- ted here in the light of the new breakdown of the primary and ding). secondary reporting sectors for IFRS 8 disclosure purposes Finally, it should be noted that with effect from September and of the reallocation of countries in the Enel Green Power 2019, the Latin America area connected with the Enel Gre- segment, the comparative figures for 2018 have been restated en Power Business Line also includes the countries Panama, appropriately. Results by business area for 2019 and 2018 Results for 2019 (1) Millions of euro Revenue and other income from third parties Revenue and other income from transactions with other segments Total revenue and other income Net income/(expense) from commodity risk management Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Other, eliminations and adjustments Total 30,519 7,360 20,092 19,482 967 1,901 6 80,327 1,532 373 1,697 13,062 163 80 (16,907) - 32,051 7,733 21,789 32,544 1,130 1,981 (16,901) 80,327 (676) 14 - (71) Gross operating margin 1,395 4,604 8,278 3,287 Depreciation, amortization, and impairment losses 4,889 1,328 3,001 1,124 Operating income (3,494) 3,276 5,277 2,163 Capital expenditure 851 4,293 (2) 3,905 449 - 158 256 (98) 270 - 126 201 (75) 134 - (733) (144) 17,704 27 10,826 (171) 45 6,878 9,947 (1) Segment revenue includes both revenue from third parties and revenue flows between the segments. An analogous approach was taken for other income and costs for the period. (2) Does not include €4 million regarding units classified as “held for sale”. 110 Consolidated Annual Report 2019Results for 2018 (1) (2) Millions of euro Revenue and other income from third parties Revenue and other income from transactions with other segments Total revenue and other income Net income/(expense) from commodity risk management Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Other, eliminations and adjustments Total 26,630 7,613 18,250 20,340 849 1,878 15 75,575 977 443 1,718 13,431 157 60 (16,786) - 27,607 8,056 19,968 33,771 1,006 1.938 (16,771) 75,575 640 (162) - (11) Gross operating margin 1,117 4,608 7,539 3,079 Depreciation, amortization, and impairment losses Operating income Capital expenditure 1,235 1,103 2,752 1,121 (118) 3,505 839 2,784 (3) 4,787 3,830 1,958 374 - 124 105 19 183 65 85 123 (38) 106 - 532 (201) 16,351 12 6,451 (213) 36 9,900 8,152 (1) Segment revenue includes both revenue from third parties and revenue flows between the segments. An analogous approach was taken for other income and costs for the period. (2) The figures have been restated to ensure comparability with the results for 2019, which are reported using business areas as the primary reporting segment. (3) Does not include €378 million regarding units classified as “held for sale”. In addition to the above, the Group monitors performance two periods under review with the goal of providing a view of by geographical area, classifying results by Region/Country. performance not only by Business Line, but also by Region/ In the table below, gross operating margin is shown for the Country. Results by business area 111 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsGross operating margin Millions of euro Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Other Total 2019 (14) 590 642 165 107 211 14 145 - - 209 (2) 209 2 (18) (16) (2) - - - - 2018 Change 22 425 469 142 7 124 51 145 - - 233 - 233 - (6) (6) - - - - - (36) 165 173 23 100 87 (37) - - - (24) (2) (24) 2 (12) (10) (2) - - - - 2019 1,240 358 2,218 51 335 899 620 162 112 39 112 75 (1) 38 737 658 79 62 58 8 (4) 2018 Change 1,220 361 2,201 46 395 877 544 156 113 70 115 62 (1) 54 538 398 140 58 54 9 (5) 20 (3) 17 5 (60) 22 76 6 (1) (31) (3) 13 - (16) 199 260 (61) 4 4 (1) 1 2019 3,906 2,025 2,259 271 1,144 222 399 223 - - 107 107 - - - - - - - - - 2018 Change 2019 2018 Change 2019 2018 Change 2019 2018 Change 2019 2018 Change 2019 2018 Change 3,679 1,965 1,763 173 815 228 364 183 - - 152 152 - - - - - - - - - 227 60 496 98 329 (6) 35 40 - - (45) (45) - - - - - - - - - (14) 1,395 (26) 1,117 12 278 (123) 4,604 115 4,608 (238) (4) (19) 8,278 (20) 7,539 1 739 3,287 3,079 208 9 126 (11) 85 20 41 (144) (201) (144) (201) 57 57 (327) (159) 17,704 16,351 (168) 1,353 2,314 2,233 715 243 2 149 17 60 15 676 158 (16) 100 19 42 13 15 15 12 12 - - - - - - - - - - - - - - - - - - - - - - - - 81 39 85 18 49 (2) 18 2 - - 3 3 - - - - - - - - - - 13 38 64 - (1) 26 38 1 - - - - - - 6 (2) (4) 80 80 (1) (1) (36) 158 31 51 56 19 37 - - - - - 3 3 - - 3 3 - - - (4) (4) (16) 124 (123) (104) 169 66 (1) (49) (72) (1) 5 5 - - - - - - - - - - - - 119 80 (1) (42) (61) 1 1 - - - - - - - - - - - - - (18) (13) (1) 8 - 7 1 1 - - (3) 3 (2) (4) 77 77 - 3 4 - (1) (20) 34 50 (14) (19) (7) (11) (1) 4 4 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 7,628 7,304 3,792 3,558 5,303 4,543 488 344 1,685 1,275 1,303 1,206 1,131 1,038 448 516 545 112 39 206 206 36 799 722 77 61 58 8 (5) 497 113 70 230 232 54 535 395 140 54 50 9 (5) 324 234 760 144 410 97 93 48 (1) (31) (68) (24) (26) (18) 264 327 (63) 7 8 (1) - Italy Iberia Latin America Argentina Brazil Chile Colombia Peru Panama Other countries Europe and Euro- Mediterranean Affairs Romania Russia Other countries North America United States and Canada Mexico Africa, Asia and Oceania South Africa India Other countries Other Total 112 Consolidated Annual Report 2019Italy Iberia Latin America Argentina Brazil Chile Colombia Peru Panama Other countries Europe and Euro- Mediterranean Affairs Romania Russia Other countries North America United States and Canada Mexico Africa, Asia and Oceania South Africa Other countries India Other Total 2019 (14) 590 642 165 107 211 14 145 209 (2) 209 2 (18) (16) (2) - - - - - - 2019 1,240 358 2,218 1,220 361 2,201 51 335 899 620 162 112 39 112 75 (1) 38 737 658 79 62 58 8 (4) 46 395 877 544 156 113 70 115 62 (1) 54 538 398 140 58 54 9 (5) (36) 165 173 23 100 87 (37) (24) (2) (24) 2 (12) (10) (2) - - - - - - - 22 425 469 142 7 124 51 145 233 233 (6) (6) - - - - - - - - - 2019 3,906 2,025 2,259 271 1,144 222 399 223 107 107 - - - - - - - - - - - (60) 20 (3) 17 5 22 76 6 (1) (31) (3) 13 - (16) 199 260 (61) 4 4 1 (1) 3,679 1,965 1,763 173 815 228 364 183 152 152 - - - - - - - - - - - 227 60 496 98 329 (6) 35 40 (45) (45) - - - - - - - - - - - (14) 1,395 (26) 1,117 12 278 (123) 4,604 115 4,608 (238) (4) (19) 8,278 (20) 7,539 1 739 Millions of euro Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Other Total 2018 Change 2018 Change 2018 Change 2019 2018 Change 2019 2018 Change 2019 2018 Change 2019 2018 Change 2019 2018 Change 2,314 2,233 715 243 2 149 17 60 15 - - 15 15 - - - - - - - - - - 676 158 (16) 100 19 42 13 - - 12 12 - - - - - - - - - - 81 39 85 18 49 (2) 18 2 - - 3 3 - - - - - - - - - - 3,287 3,079 208 13 38 64 - (1) 26 38 1 - - - 6 (2) (4) 80 80 - (1) - - (1) (36) 158 31 51 56 - - 19 37 - - - 3 3 - - 3 3 - (4) (4) - - (16) 124 (18) (13) 8 - (1) 7 1 1 - - (3) 3 (2) (4) 77 77 - 3 4 - (1) (20) 34 169 66 119 80 (123) (104) (1) (49) (72) - (1) - - 5 5 - - - - - - - - - (1) (42) (61) - - - - 1 1 - - - - - - - - - 50 (14) (19) - (7) (11) - (1) - - 4 4 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 7,628 7,304 3,792 3,558 5,303 4,543 488 344 1,685 1,275 1,303 1,206 1,131 1,038 545 112 39 497 113 70 448 516 206 206 36 799 722 77 61 58 8 (5) 230 232 54 535 395 140 54 50 9 (5) 324 234 760 144 410 97 93 48 (1) (31) (68) (24) (26) (18) 264 327 (63) 7 8 (1) - 9 126 (11) 85 20 41 (144) (201) (144) (201) 57 57 (327) (159) 17,704 16,351 (168) 1,353 Results by business area 113 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements114 Consolidated Annual Report 2019 Consolidated Annual Report 2019Thermal Generation and Trading 129.7 TWh Net electricity generation -41.6% from coal-fired plants compared to 2018 42.2 GW Net efficient generation capacity -26.1% from coal-fired plants compared to 2018 3.5% Percentage of coal revenue out of total €1,395 mln Gross operating margin €1,117 million in 2018 Operations Net electricity generation Millions of kWh Coal-fired plants Fuel-oil and turbo-gas plants Combined-cycle plants Nuclear plants Total net generation - of which Italy - of which Iberia - of which Latin America - of which Europe and Euro-Mediterranean Affairs 2019 37,592 20,887 44,980 26,279 2018 64.366 24,832 38,134 24,067 129,738 151,399 22,604 51,312 23,388 32,434 27,757 62,020 22,441 39,181 Change (26,774) (3,945) 6,846 2,212 (21,661) (5,153) (10,708) 947 (6,747) -41.6% -15.9% 18.0% 9.2% -14.3% -18.6% -17.3% 4.2% -17.2% The decrease in net generation was essentially due to a sharp increase of 6,846 million kWh in combined-cycle generation, decrease in coal generation in the amount of 26,774 million mainly in Italy (3,013 million kWh), Iberia (2,731 million kWh) kWh, including Iberia (14,673 million kWh), Italy (7,941 million and Latin America (1,092 million kWh). The increase in nuclear kWh) and Russia (5,239 million kWh) as a result of the de- generation can be attributed to the increased use of nuclear cline in their competitiveness. This was partially offset by an energy in Iberia due to poor water availability. Results by business area 115 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNet efficient generation capacity MW Coal-fired plants Fuel-oil and turbo-gas plants Combined-cycle plants Nuclear plants Total - of which Italy - of which Iberia - of which Latin America - of which Europe and Euro-Mediterranean Affairs at Dec. 31, 2019 at Dec. 31, 2018 Change 11,695 12,211 14,991 3,318 42,215 13,480 15,957 7,523 5,255 15,828 12,250 15,021 3,318 46,417 13,613 16,192 7,734 8,878 (4,133) (39) (30) - (4,202) (133) (235) (211) -26.1% -0.3% -0.2% - -9.1% -1.0% -1.5% -2.7% (3,623) -40.8% The decrease in net efficient generation capacity reflects the thermal and coal-fired plants respectively, has been declining reduced use of coal-fired plants, especially in Russia (3,623 steadily as a result of corporate strategic choices inspired by MW) following the disposal of the Reftinskaya plant mentio- a sustainable business model pursuing objectives to combat ned earlier. climate change and achieve decarbonization, as shown in the More generally, “thermal” and “coal” revenue, i.e., from following table (including percentage out of total): 2019 10,322 2,827 1,296 12.8% 3.5% 1.6% 2018 10,894 4,043 1,080 14.4% 5.3% 1.4% 2019 32,051 1,395 (3,494) 851 2018 27,607 1,117 (118) 839 Change 4,444 278 (3,376) 12 16.1% 24.9% - 1.4% Millions of euro “Thermal” revenue “Coal” revenue “Nuclear” revenue Percentage of “thermal” revenue out of total Percentage of “coal” revenue out of total Percentage of “nuclear” revenue out of total Performance Millions of euro Revenue Gross operating margin Operating income Capital expenditure 116 Consolidated Annual Report 2019The following tables show a breakdown of performance by Region/Country in 2019. Revenue Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru North America Europe and Euro-Mediterranean Affairs - of which Romania - of which Russia - of which other countries Other Eliminations and adjustments Total 2019 23,688 6,261 1,915 323 289 828 110 365 29 956 42 911 3 54 (852) 32,051 2018 18,954 6,329 1,726 227 270 739 126 364 3 1,054 55 999 - 81 (540) 27,607 Change 4,734 (68) 189 96 19 89 (16) 1 26 (98) (13) (88) 3 (27) (312) 4,444 25.0% -1.1% 11.0% 42.3% 7.0% 12.0% -12.7% 0.3% - -9.3% -23.6% -8.8% - -33.3% -57.8% 16.1% The change in revenue is mainly attributable to the item to non-financial transactions with physical delivery measured “Sale of commodities under contracts with physical delivery”, at fair value in accordance with IFRS 9. For more information, reflecting reclassifications, with no impact on margins, linked please see section 4.3 of the notes to the consolidated finan- to the application of the IFRIC Agenda Decision of March 2019 cial statements. Gross operating margin Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru North America Europe and Euro-Mediterranean Affairs - of which Romania - of which Russia - of which other countries Other Total Results by business area 2019 2018 Change (14) 590 642 165 107 211 14 145 (18) 209 (2) 209 2 (14) 1,395 22 425 469 142 7 124 51 145 (6) 233 - 233 - (26) 1,117 (36) 165 173 23 100 87 (37) - (12) (24) (2) (24) 2 12 278 - 38.8% 36.9% 16.2% - 70.2% -72.5% - - -10.3% - -10.3% - 46.2% 24.9% 117 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsThe increase in the gross operating margin in 2019 is mainly that underwent impairment testing, totaling €103 mil- due to: lion, because their value was deemed non-recoverable > an increase of €173 million in the margin in Latin America, through operations; mainly attributable to the indemnity in the amount of €80 − deterioration of €90 million in the results on commodity million received from a major customer for having exerci- contracts measured at fair value; sed the withdrawal option in advance and to the improve- > decrease of €36 million in the margin in Italy, mainly due to: ment in the margin of the Fortaleza plant (€108 million) due − an increase in writedowns of fuel, consumables, and to a decrease in provisioning costs; spare parts inventories at a number of coal-fired plants, > an increase of €165 million in Iberia, essentially attributable totaling €205 million, because their value was deemed to the following factors: non-recoverable through operations; − an increase of €279 million in the margin on nuclear ge- − recognition of a gain of €108 million by Enel Produzione neration, mainly due to an increase in volumes gene- on the disposal of the Mercure power plant, which was rated and in prices, as well as a reduction in taxes on only partially offset by an increase in provisions for en- nuclear generation (€43 million); vironmental costs in accordance with the contract and − a reduction of €63 million in taxes and duties on ther- related to the industrial site; mal generation due, above all, to suspension of taxes on − a decrease of €65 million in costs for environmental power generation and on the consumption of hydrocar- compliance in thermal generation; bons used to generate power in accordance with Royal > a decrease of €24 million in the margin posted for Euro- Decree no. 15/2018 of October 5, 2018; pe and Euro-Mediterranean Affairs, recognized mainly in − an increase in writedowns of fuel, consumables and Russia. spare parts inventories at a number of coal-fired plants Operating income Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru North America Europe and Euro-Mediterranean Affairs - of which Romania - of which Russia - of which other countries Other Eliminations and adjustments Total 2019 (1,908) (1,650) 68 100 94 (233) (2) 109 (19) 30 (1) 31 - (15) - 2018 (248) (274) 266 89 (1) 30 37 111 (6) 170 - 170 - (26) - Change (1,660) (1,376) (198) 11 95 (263) (39) (2) (13) (140) (1) (139) - 11 - (3,494) (118) (3,376) - - -74.4% 12.4% - - - -1.8% - -82.4% - -81.8% - 42.3% - - The decrease in operating income is due to the increase of > impairment in Italy, Spain, Chile and Russia for coal-fired €3,654 million in depreciation, amortization and impairment, plants totaling €4,010 million, as described in detail in the despite the improvement in the gross operating margin. More “Operating income” section of “Group performance”; specifically, the increase in depreciation, amortization and im- > an increase in depreciation and amortization in application pairment mainly concerned: of IFRS 16 (€34 million). 118 Consolidated Annual Report 2019Capital expenditure Millions of euro Italy Iberia Latin America Europe and Euro-Mediterranean Affairs Other Total 2019 189 388 193 79 2 851 2018 172 345 251 70 1 839 Change 17 43 (58) 9 1 12 9.9% 12.5% -23.1% 12.9% - 1.4% The increase in capital expenditure is mainly attributable to were partially offset by a decrease of €58 million in capital Italy (€17 million) and Iberia (€43 million) and concerns, abo- expenditure in Latin America, particularly in Argentina and ve all, plant maintenance and safety upgrading. These effects Chile, regarding coal-fired and combined-cycle plants. Results by business area 119 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements120 Consolidated Annual Report 2019 Consolidated Annual Report 2019Enel Green Power 99.4 TWh Net electricity generation +20.3% from wind farms compared to 2018 42.1 GW Net efficient generation capacity 50% of total Group generation capacity €4,604 mln Gross operating margin €4,608 million in 2018 +54.2% Capital expenditure compared to 2018 for a total of €4,293 million Operations Net electricity generation Millions of kWh Hydroelectric Geothermal Wind Solar Other sources Total net generation - of which Italy - of which Iberia - of which Latin America - of which Europe and Euro-Mediterranean Affairs - of which North America - of which Africa, Asia and Oceania 2019 62,580 6,148 26,668 3,974 21 99,391 24,308 10,090 48,448 2,005 12,969 1,571 2018 65,893 5,881 22,161 4,897 108 98,940 25,476 12,172 48,137 1,895 9,752 1,508 Change (3,313) 267 4,507 (923) (87) 451 (1,168) (2,082) 311 110 3,217 63 -5.0% 4.5% 20.3% -18.8% -80.6% 0.5% -4.6% -17.1% 0.6% 5.8% 33.0% 4.2% Net electricity generation 2019 increased slightly from 2018 ases in wind power generation in Mexico (down 759 million due to increases in wind and geothermal production, which kWh) due, in part, to the sale of a number of companies in were partially offset by decreases in hydroelectric and so- September 2018. lar power generation. The most significant changes in wind The increase in geothermal generation came mainly in the power came in the United States and in Iberia, where pro- United States (up 285 million kWh). duction increased by 4,496 million kWh and 439 million kWh, The decrease in hydro generation was due mainly to redu- respectively. These increases were partially offset by decre- ced water availability in Italy and Iberia, only partially offset Results by business area 121 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsby an increase in Latin America (up 458 million kWh), where lion kWh), and Peru (+462 million kWh), and these increases output varied throughout the region. Of particular note were were offset by decreases in Argentina (-350 million kWh), Chi- increases in Brazil (+940 million kWh), Colombia (+857 mil- le (-899 million kWh), and Panama (-308 million kWh). Net efficient generation capacity MW Hydroelectric Geothermal Wind Solar Other sources Total net power efficiency - of which Italy - of which Iberia - of which Latin America - of which Europe and Euro-Mediterranean Affairs - of which North America - of which Africa, Asia and Oceania at Dec. 31, 2019 at Dec. 31, 2018 Change 27,830 878 10,327 3,094 5 42,134 13,972 7,391 13,676 1,037 5,282 776 27,844 804 8,190 2,322 43 39,203 14,011 6,525 13,869 883 3,220 695 (14) 74 2,137 772 (38) 2,931 (39) 866 (193) 154 2,062 81 -0.1% 9.2% 26.1% 33.2% -88.4% 7.5% -0.3% 13.3% -1.4% 17.4% 64.0% 11.7% Net power efficiency capacity for 2019 increased from 2018, solar plants, as well as to an increase in power generation mainly in the United States due to the acquisition by Enel capacity at the High Lonesome and Roadrunner plants. Wind Green Power North America (EPGNA, now named Enel North and solar power generation capacity also increased in Iberia. America) of 13 companies that own wind, geothermal and Performance Millions of euro Revenue Gross operating margin Operating income Capital expenditure (1) The figure does not include €4 million regarding units classified as “held for sale”. (2) The figure does not include €378 million regarding units classified as “held for sale”. 2019 7,733 4,604 3,276 2018 8,056 4,608 3,505 4,293 (1) 2,784 (2) Change (323) (4) (229) 1,509 -4.0% -0.1% -6.5% 54.2% 122 Consolidated Annual Report 2019The following tables show a breakdown of performance by country in 2019. Revenue (1) Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru - of which Panama - of which other countries North America - of which the United States - of which Mexico Europe and Euro-Mediterranean Affairs - of which Romania - of which Greece - of which Bulgaria - of which other countries Africa, Asia and Oceania Other Eliminations and adjustments Total 2019 1,918 653 3,692 64 694 1,489 1,007 201 169 68 1,115 956 159 271 175 86 8 2 107 105 (128) 7,733 2018 2,084 716 3,843 59 676 1,584 941 334 151 98 860 564 296 255 173 73 9 - 101 316 (119) 8,056 Change -8.0% -8.8% -3.9% 8.5% 2.7% -6.0% 7.0% -39.8% 11.9% -30.6% 29.7% 69.5% -46.3% 6.3% 1.2% 17.8% -11.1% - 5.9% -66.8% -7.6% -4.0% (166) (63) (151) 5 18 (95) 66 (133) 18 (30) 255 392 (137) 16 2 13 (1) 2 6 (211) (9) (323) (1) These figures have been adjusted for the purposes of comparison with those of December 2019 to take account of the fact that Panama, Costa Rica, Guate- mala, El Salvador and Nicaragua, which were previously included in the North and Central America geographical area, are now included within Latin America. Results by business area 123 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsGross operating margin (1) Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru - of which Panama - of which other countries North America - of which the United States - of which Mexico Europe and Euro-Mediterranean Affairs - of which Romania - of which Russia - of which Greece - of which Bulgaria - of which other countries Africa, Asia and Oceania Other Total 2019 1,240 358 2,218 51 335 899 620 162 112 39 737 658 79 112 75 (1) 35 6 (3) 62 2018 1,220 361 2,201 46 395 877 544 156 113 70 538 398 140 115 62 (1) 49 6 (1) 58 Change 20 (3) 17 5 (60) 22 76 6 (1) (31) 199 260 (61) (3) 13 - (14) - (2) 4 (123) 4,604 115 4,608 (238) (4) 1.6% -0.8% 0.8% 10.9% -15.2% 2.5% 14.0% 3.8% -0.9% -44.3% 37.0% 65.3% -43.6% -2.6% 21.0% - -28.6% - - 6.9% - -0.1% (1) These figures have been adjusted for the purposes of comparison with those of December 2019 to take account of the fact that Panama, Costa Rica, Guate- mala, El Salvador and Nicaragua, which were previously included in the North and Central America geographical area, are now included within Latin America. Gross operating margin decreased by €4 million from 2018, which were partially offset by decreases in such income which was essentially due to the following: from Diamond Vista (-€40 million) and Rattlesnake Cre- > an increase of €199 million in the margin in North America, ek (-€39 million); mainly due to: − a reduction of €61 million in the margin in Mexico due − an increase of €260 million in the margin the United Sta- mainly to the change in the scope of consolidation fol- tes due essentially to the increase (€92 million) related lowing the sale of eight companies from Project Kino at to the change in the scope of consolidation following the end of September 2018; the acquisition by Enel North America (formerly Enel > an increase of €17 million in the margin in Latin America, Green Power North America) of 13 companies sold by mainly due to: Enel Green Power North America Renewable Energy − the increase of €76 million in the margin in Colombia, Partners LLC (EGPNA REP) and to the negative goodwill due essentially to an increase in revenue on electricity on the transaction (€106 million); to the negative goo- sales (€73 million) as a result of an increase in average dwill related to the purchase of Tradewind Energy (€75 prices and in quantities traded on the power exchange, million), which was partially offset by the company’s and lower costs for electricity purchases and transport negative margin (-€53 million); to the gains on the di- (€78 million) related to lower quantities purchased, and to sposal of the projects Outlaw (€22 million) and Gratiot a decrease in fuel consumption (€15 million), partially of- (€20 million); to the increase in tax partnership income fset by an increase in costs for ancillary services related related to the companies High Lonesome Wind Power to the electricity business (€82 million); (€87 million) and Roadrunner Solar Project (€67 million), − an increase of €22 million in the margin in Chile, essen- 124 Consolidated Annual Report 2019tially attributable to recognition of €80 million in penalty decreases in quantities generated and the change in the revenue by Enel Generación Chile due to a major indu- scope of consolidation that took place in Uruguay in De- strial client exercising the right to early withdrawal from cember 2018; a long-term electricity provisioning agreement, partially > an increase of €20 million in the margin in Italy due essen- offset by a loss on the electricity margin (€62 million) as a tially to an increase in the sales price of electricity despite result of a decrease in production; the lower volume of hydro generation, partially offset by − a decrease of €60 million in the margin in Brazil, where the effect of the recognition in the previous year of the gain the increase in revenue from electricity sales as a result on the sale of EF Solare Italia (€65 million); of greater generation, partly eroded by a reduction in spot > a reduction of €238 million in the margin that mainly prices, was more than offset by an increase in costs for reflected the recognition in the previous year of the gain on the purchase of electricity and the change in the scope the sale of eight Project Kino companies in Mexico at the of consolidation related to the disposal of three plants; end of September 2018, as well as the fair value measure- − decrease of €31 million in the margin in other coun- ment of the Group’s 20% interest in the companies (€190 tries due mainly to a decline in revenue from the sale million) and the gain on the sale of a number of companies of electricity in Costa Rica and Guatemala as a result of in Uruguay (€18 million). Results by business area 125 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsOperating income (1) Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru - of which Panama - of which other countries North America - of which the United States - of which Mexico Europe and Euro-Mediterranean Affairs - of which Romania - of which Russia - of which Greece - of which Bulgaria - of which other countries Africa, Asia and Oceania Other Eliminations and adjustments Total 2019 909 183 1,809 38 250 728 560 123 96 14 418 367 51 58 49 - 10 3 (4) 24 (125) - 3,276 2018 828 208 1,776 39 309 699 488 107 98 36 364 270 94 195 40 (1) 154 3 (1) 19 115 - 3,505 Change 9.8% -12.0% 1.9% -2.6% -19.1% 4.1% 14.8% 15.0% -2.0% -61.1% 14.8% 35.9% -45.7% -70.3% 22.5% - 81 (25) 33 (1) (59) 29 72 16 (2) (22) 54 97 (43) (137) 9 1 (144) -93.5% - (3) 5 (240) - (229) - - 26.3% - - -6.5% (1) These figures have been adjusted for the purposes of comparison with those of December 2019 to take account of the fact that Panama, Costa Rica, Guate- mala, El Salvador and Nicaragua, which were previously included in the North and Central America geographical area, are now included within Latin America. In 2019, operating income, taking account of depreciation, the start of operations at the Rattlesnake, Hilltopper and Dia- amortization and impairment losses in the amount of €1,328 mond Vista plants, the impairment losses on the assets of a million (€1,103 million in 2018), decreased by €229 million number of wind projects that are no longer viable, and the fair compared with 2018 due to an increase in depreciation and value adjustment of hydroelectric projects classified as HFS amortization in the United States (€116 million) related mainly (€36 million), as well as the recognition in the previous year of to the change in the scope of consolidation noted earlier and the reversal of impairment on the Hellas CGU (€117 million). 126 Consolidated Annual Report 2019Capital expenditure (1) Millions of euro Italy Iberia Latin America North America Europe and Euro-Mediterranean Affairs Africa, Asia and Oceania Other Total 2019 240 765 1,055 (2) 1,744 189 274 26 2018 252 (3) 246 654 1,322 (4) 139 142 29 (12) 519 401 422 50 132 (3) 4,293 2,784 1,509 Change -4.8% - 61.3% 31.9% 36.0% 93.0% -10.3% 54.2% (1) These figures have been adjusted for the purposes of comparison with those of December 2019 to take account of the fact that Panama, Costa Rica, Guate- mala, El Salvador and Nicaragua, which were previously included in the North and Central America geographical area, are now included within Latin America. (2) The figure does not include €4 million regarding units classified as “held for sale”. (3) The figure does not include €3 million regarding units classified as “held for sale”. (4) The figure does not include €375 million regarding units classified as “held for sale”. Capital expenditure increased by €1,509 million compared America attributable mainly to wind farms (€274 million) with the previous year. More specifically, the change is attri- and photovoltaic plants (€170 million), which was partially butable to: offset by a decrease in capital expenditure on hydroelectric > an increase of €519 million in capital expenditure in Iberia plants (€90 million). The increase in capital expenditure attributable mainly to wind farms (€364 million) and photo- was concentrated in Brazil; voltaic plants (€153 million); > an increase of €132 million in capital expenditure in Africa, > an increase of €422 million in capital expenditure in North Asia and Oceania related mainly to wind farms (€82 mil- America, mainly attributable to an increase of €237 million lion) following an increase in South Africa (€101 million), in the United States and of €74 million in Mexico for so- which was partially offset by decreases in capital expendi- lar plants and to increases in capital expenditure for wind ture in India (€19 million) and for solar plants (€50 million), farms (€112 million) following a sharp increase in Mexi- mainly in Australia (€38 million); co (€224 million), partially offset by a decrease in capital > an increase of €50 million in capital expenditure by Europe expenditure in the United States (€198 million); and Euro-Mediterranean Affairs, mainly on wind farms in > an increase of €401 million in capital expenditure in Latin Russia and Greece. Results by business area 127 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements128 Consolidated Annual Report 2019 Consolidated Annual Report 2019Infrastructure and Networks 504 TWh Electricity transported on Enel’s network 484 TWh in 2018 €8,278 mln Gross operating margin €7,539 million in 2018 €3,905 mln Capital expenditure 39% of total Group capital expenditure Operations Electricity distribution and transport networks Millions of kWh Electricity transported on Enel’s network (1) - of which Italy - of which Iberia - of which Latin America - of which Europe and Euro-Mediterranean Affairs End users (no.) End users with active smart meters (no.) 2019 504,027 224,587 126,454 137,295 15,691 2018 484,377 226,460 124,865 117,412 15,640 73,258,840 72,945,664 44,668,538 43,770,085 Change 19,650 (1,873) 1,589 19,883 51 313,176 898,453 4.1% -0.8% 1.3% 16.9% 0.3% 0.4% 2.1% (1) The figure for 2018 reflects a more accurate measurement of amounts transported. The increase in energy transported on the network is mainly > Italy (-0.8%), where electricity distributed to end users to- attributable to: taled 224.58 TWh, a slight decrease from the previous ye- > Latin America (+16.9%) following the acquisition of Enel ar’s figure of 226.46 TWh. This reduction reflects declining Distribuição São Paulo, a Brazilian electricity distribution demand among medium-voltage (-1.2 TWh) and high-vol- company, on June 7, 2018; tage customers (-1 TWh). Demand was stable among > Romania (+0.3%), where the increase was mainly due to low-voltage customers; new connections of business customers (+21.4 GWh), > Iberia (+1.3%), where the increase was due essentially to which was partially offset by a decrease for residential cu- an increase in electricity transported by Edistribución Re- stomers (-21.1 GWh); des Digitales SL. Results by business area 129 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsAverage frequency of interruptions per customer SAIFI (average no.) 2019 2018 Change Italy Iberia Argentina Brazil Chile Colombia Peru Romania Average duration of interruptions per customer SAIDI (average min.) Italy Iberia Argentina Brazil Chile Colombia Peru Romania 1.9 1.4 6.0 5.8 1.6 6.8 2.8 4.1 2019 48.5 75.8 1.8 1.6 6.7 6.2 1.5 9.0 2.8 3.8 2018 47.2 79.5 0.1 (0.2) (0.7) (0.4) 0.1 (2.2) - 0.3 1.3 (3.7) Change 1,214.1 1,485.4 (271.3) 728.8 184.1 666.6 418.9 169.6 716.8 178.0 710.0 436.0 173.8 12.0 6.1 (43.4) (17.1) (4.2) 5.6% -12.5% -10.4% -6.5% 6.7% -24.4% - 7.9% 2.8% -4.7% -18.3% 1.7% 3.4% -6.1% -3.9% -2.4% As indicated in the tables, the most significant service inter- gh-voltage transmission systems not operated by the Group. ruptions occurred in Argentina, due in particular to faults in hi- 2019 2018 Change 4.7 7.5 15.5 12.8 5.0 7.7 8.2 9.7 4.7 7.5 14.9 12.4 5.0 7.7 7.9 9.8 - - 0.6 0.4 - - 0.3 (0.1) - - 4.0% 3.2% - - 3.8% -1.0% Network losses (avg. %) Italy Iberia Argentina Brazil Chile Colombia Peru Romania 130 Consolidated Annual Report 2019Performance Millions of euro Revenue Gross operating margin Operating income Capital expenditure 2019 21,789 8,278 5,277 3,905 2018 19,968 7,539 4,787 3,830 The following tables shows a breakdown of performance by country in 2019. Change 9.1% 9.8% 10.2% 2.0% Change 1,821 739 490 75 (25) 53 1,758 133 1,317 119 108 81 1 17 17 -0.3% 2.0% 19.0% 12.9% 23.4% 8.8% 20.3% 11.1% 0.3% 39.5% 21.8% 9.1% 6.2% 3.1% 28.1% 56.6% 40.4% -2.6% 9.6% 21.9% -29.6% 5.0% 9.8% 131 2019 7,647 2,724 11,033 1,166 6,946 1,467 641 813 386 60 (61) 2018 7,672 2,671 9,275 1,033 5,629 1,348 533 732 385 43 (78) 21,789 19,968 1,821 2019 3,906 2,025 2,259 271 1,144 222 399 223 107 (19) 2018 3,679 1,965 1,763 173 815 228 364 183 152 (20) 8,278 7,539 Change 227 60 496 98 329 (6) 35 40 (45) 1 739 Revenue Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru Europe and Euro-Mediterranean Affairs Other Eliminations and adjustments Total Gross operating margin Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru Europe and Euro-Mediterranean Affairs Other Total Results by business area Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsThe gross operating margin increased as a result of: sonnel costs due essentially to actuarial gains in application > an increase of €496 million in the margin in Latin America of Article 4 of Law 92/2012 (€31 million). It should also be despite the effects of adverse exchange rate developments noted that, in 2019, e-distribuzione recognized an additional of €133 million, an increase that is mainly attributable to: indemnity of €50 million related to the sale of Enel Rete Gas − in Brazil, the consolidation of Enel Distribuição São Pau- to F2i, following the indemnity of €128 million recognized lo (€313 million); in 2018; − in Argentina, the Edesur agreement with the govern- > an increase in the margin in Iberia due mainly to an incre- ment resolving mutual pending issues arising during the ase in electricity-transport revenue (€56 million) and a gain period from 2006 to 2016 in the amount of €209 million. on the sale of the right to use the fiber-optic network (€24 This increase was partially offset by a reduction in sales million). These effects were partially offset by a decrease in revenue following a decrease in quantities transported; revenue from services provided to third-party end users; > in increase in the gross operating margin in Italy following > a decrease in the gross operating margin of Europe and a reduction in costs for the purchase of energy efficiency Euro-Mediterranean Affairs due to an increase in costs in certificates due to both a decrease in purchase prices and Romania, mainly for personnel (€12 million), services (€12 in volumes purchased (€191 million) and a reduction in per- million) and electricity purchases (€16 million). Operating income Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru Europe and Euro-Mediterranean Affairs Other Total 2019 2,647 1,288 1,349 240 487 173 292 157 13 (20) 2018 2,508 1,220 1,025 98 362 178 261 126 54 (20) 5,277 4,787 Change 139 68 324 142 125 (5) 31 31 (41) - 490 5.5% 5.6% 31.6% - 34.5% -2.8% 11.9% 24.6% -75.9% - 10.2% The increase in operating income in 2019 was due to the in Brazil of the writedown of the Funac fund in the amount increase in gross operating margin, which was only partially of €96 million, which became necessary after the repeal by offset by an increase of €249 million in depreciation, amortiza- the state of Goiás of the obligation to meet the liabilities, tion and impairment losses. More specifically, the increase in even if not recognized, resulting from the administrative depreciation, amortization and impairment mainly concerned: and judicial dispute of Enel Distribuição Goiás; > an increase of €172 million in depreciation, amortization > an increase of €88 million in depreciation, amortization and and impairment in Latin America, which was essentially impairment in Italy due to an increase in capital expenditu- due to the change in the scope of consolidation with the re and to the application of IFRS 16 (€38 million). addition of Enel Distribuição São Paulo and the recognition 132 Consolidated Annual Report 2019Capital expenditure Millions of euro Italy Iberia Latin America Europe and Euro-Mediterranean Affairs Other Total 2019 1,753 647 1,335 169 1 3,905 2018 1,685 668 1,315 159 3 3,830 Change 68 (21) 20 10 (2) 75 4.0% -3.1% 1.5% 6.3% -66.7% 2.0% The increase in capital expenditure is mainly attributable to: metering equipment; > Italy and capital expenditure for low-voltage plants; > Latin America, and Argentina specifically, in order to impro- > Iberia and the reduction in capital expenditure for the di- ve the quality of service provided to users through works stribution network and for software applications, an effect aimed at strengthening the low-, medium- and high-volta- which was partially offset by an increase in capital expendi- ge networks. ture for substations, transformers, and the replacement of Results by business area 133 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements134 Consolidated Annual Report 2019 Consolidated Annual Report 2019End-user Markets 302 TWh Electricity sold 295 TWh in 2018 €3,287 mln Gross operating margin €3,079 million in 2018 69.9 mln Retail customers of which 22.8 million free market Operations Electricity sales Millions of kWh Free market Regulated market Total - of which Italy - of which Iberia - of which Latin America - of which Europe and Euro-Mediterranean Affairs 2019 152,588 149,088 301,676 97,539 89,441 104,962 9,734 2018 152,619 142,813 295,432 104,318 89,639 91,075 10,400 Change (31) 6,275 6,244 (6,779) (198) 13,887 (666) - 4.4% 2.1% -6.5% -0.2% 15.2% -6.4% This positive performance of electricity sales in 2019 essen- customers to the free market. This factor is seen as the cau- tially reflects the increase in quantities sold in Latin America, se for the reduction in quantities sold in Romania as well. In mainly in Brazil following the acquisition of Enel Distribuição Spain, the change was essentially due to reduced consump- São Paulo. This change was only partially offset by the re- tion. The Group’s retail customers totaled 69,914,992, of whi- duction of electricity sold in Italy due to a decrease in sales ch 22,780,590 on the free market. At December 31, 2018, on the regulated market following the transfer of 1.8 million those figures were 71,117,743 and 21,478,721 respectively. Natural gas sales Millions of m3 Business to consumer Business to business Total - of which Italy - of which Iberia - of which Europe and Euro-Mediterranean Affairs 2019 3,698 6,802 10,500 4,736 5,750 14 2018 3,704 7,474 11,178 4,761 6,409 8 Change (6) (672) (678) (25) (659) 6 The reduction in natural gas sales was mainly due to the aforementioned reductions in consumption in Spain. Results by business area -0.2% -9.0% -6.1% -0.5% -10.3% 75.0% 135 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsPerformance Millions of euro Revenue Gross operating margin Operating income Capital expenditure 2019 32,544 3,287 2,163 449 2018 33,771 3,079 1,958 374 Change (1,227) 208 205 75 -3.6% 6.8% 10.5% 20.1% The following tables shows a breakdown of performance by country in 2019. 2019 16,042 13,867 1,504 30 398 268 769 39 1,131 - 32,544 2018 16,367 14,920 1,443 6 299 255 848 35 1,040 1 Change (325) (1,053) 61 24 99 13 (79) 4 91 (1) 33,771 (1,227) 2019 2,314 715 243 2 149 17 60 15 15 2018 2,233 676 158 (16) 100 19 42 13 12 Change 81 39 85 18 49 (2) 18 2 3 3,287 3,079 208 -2.0% -7.1% 4.2% - 33.1% 5.1% -9.3% 11.4% 8.8% - -3.6% 3.6% 5.8% 53.8% - 49.0% -10.5% 42.9% 15.4% 25.0% 6.8% Revenue Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru Europe and Euro-Mediterranean Affairs Eliminations and adjustments Total Gross operating margin Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru Europe and Euro-Mediterranean Affairs Total 136 Consolidated Annual Report 2019The increase in the gross operating margin is mainly attri- ving mutual pending issues arising during the period butable to: 2006-2016 (€24 million); > an increase in margins in Latin America due to: > an increase of €108 million in the margin on the free mar- − the consolidation of Enel Distribuição São Paulo begin- ket in Italy, which was only partially offset by a reduction of ning in June of last year (€51 million); €27 million on the regulated market; − an increase in revenue in Argentina following the Ede- > a decrease in the cost ratio in Iberia. sur settlement agreement with the government resol- Operating income Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru Europe and Euro-Mediterranean Affairs Eliminations and adjustments Total 2019 1,609 491 77 (35) 44 6 52 10 (14) - 2018 1,379 494 87 (16) 52 16 29 6 (2) - 2,163 1,958 Change 16.7% -0.6% -11.5% - -15.4% -62.5% 79.3% 66.7% - - 10.5% 230 (3) (10) (19) (8) (10) 23 4 (12) - 205 In 2019, operating income, including €1,124 million in de- This positive performance was impacted by the loss recogni- preciation, amortization and impairment, increased due, abo- zed in other countries. In Romania, the loss of €14 million ve all, to performance improvements in Italy, mainly for Enel reflected an increase in the impairment of trade receivables Energia following the improvement in margins noted above compared with 2018. and the decrease of €149 million in depreciation, amortization and impairment, which was essentially related to the decrea- se in allowances for doubtful accounts. Capital expenditure Millions of euro Italy Iberia Latin America Europe and Euro-Mediterranean Affairs Total 2019 324 110 - 15 449 2018 248 107 1 18 374 Change 30.6% 2.8% - -16.7% 20.1% 76 3 (1) (3) 75 The change in capital expenditure is mainly attributable to This increase was due to the capitalization of costs related to the increase in Italy, particularly with regard to Enel Energia. the acquisition of new customer contracts. Results by business area 137 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements138 Consolidated Annual Report 2019 Consolidated Annual Report 2019Enel X 6.3 GW Demand Response 6.2 GW in 2018 79,565 Charging points 48,967 in 2018 2,424 Lighting points 2,467 in 2018 €158 mln Gross operating margin €124 million in 2018 +47.5% Capital expediture compared to 2018 for a total of €270 million Operations Demand Response (MW) Lighting points (no.) Storage (MW) (1) Charging points (no.) (1) Excluding storage from other sectors. 2019 6,297 2,424 12 2018 6,215 2,467 3 Change 82 (43) 9 79,565 48,967 30,598 1.3% -1.7% - 62.5% In 2019, the Group further developed the charging infrastructure for electric vehicles, particularly in Italy. Performance Millions of euro Revenue Gross operating margin Operating income Capital expenditure 2019 1,130 158 (98) 270 2018 1,006 124 19 183 Change 124 34 (117) 87 12.3% 27.4% - 47.5% Results by business area 139 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsThe following tables shows a breakdown of performance by country in 2019. Revenue Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru North America Europe and Euro-Mediterranean Affairs Africa, Asia and Oceania Other Eliminations and adjustments Total Gross operating margin Millions of euro Italy Iberia Latin America - of which Brazil - of which Chile - of which Colombia - of which Peru North America Europe and Euro-Mediterranean Affairs Africa, Asia and Oceania Other Total 2019 282 261 186 4 17 81 77 7 328 35 52 66 (80) 1,130 2018 247 247 161 - 15 70 70 6 338 7 - 50 (44) 1,006 Change 35 14 25 4 2 11 7 1 (10) 28 52 16 (36) 124 2019 2018 Change 13 38 64 (1) 26 38 1 80 - (1) (36) 158 31 51 56 - 19 37 - 3 3 (4) (16) 124 (18) (13) 8 (1) 7 1 1 77 (3) 3 (20) 34 14.2% 5.7% 15.5% - 13.3% 15.7% 10.0% 16.7% -3.0% - - 32.0% -81.8% 12.3% -58.1% -25.5% 14.3% - 36.8% 2.7% - - - 75.0% - 27.4% The increase in gross operating margin came mainly in North ly offset by an increase in operating expenses connected with America as a result of an adjustment to the amount paid for the structural growth in Italy, Spain and Latin America. purchase of eMotorWerks (€98 million) in application of certain clauses of the related contract. These effects were only partial- 140 Consolidated Annual Report 2019Operating income Millions of euro Italy Iberia Latin America - of which Brazil - of which Chile - of which Colombia - of which Peru North America Europe and Euro-Mediterranean Affairs Africa, Asia and Oceania Other Total 2019 (45) (13) 58 (4) 24 37 1 (50) (3) (5) (40) (98) 2018 Change (9) 37 54 (1) 19 36 - (31) 2 (8) (26) 19 (36) (50) 4 (3) 5 1 1 (19) (5) 3 (14) (117) - - 7.4% - 26.3% 2.8% - -61.3% - 37.5% -53.8% - In 2019, operating income decreased despite the improve- impairment losses. This mainly concerned the impairment of ment in the gross operating margin, essentially as a result of intangible assets (€83 million) in respect of obsolete techno- an increase of €151 million in depreciation, amortization and logies that are no longer in use. Capital expenditure Millions of euro Italy Iberia Latin America North America Europe and Euro-Mediterranean Affairs Africa, Asia and Oceania Other Total 2019 2018 Change 52 64 40 61 4 1 48 270 54 39 29 38 3 - 20 183 (2) 25 11 23 1 1 28 87 -3.7% 64.1% 37.9% 60.5% 33.3% - - 47.5% Capital expenditure increased in Spain, the United States support new business initiatives (demand response, charging and Italy due to the purchase of new software licenses to systems, e-mobility, public lighting). Results by business area 141 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements142 Consolidated Annual Report 2019 Consolidated Annual Report 2019Services and Other Performance Millions of euro Revenue Gross operating margin Operating income Capital expenditure The tables below show performance by geographic area in 2019. Revenue Millions of euro Italy Iberia Latin America Europe and Euro-Mediterranean Affairs Other Eliminations and adjustments Total Gross operating margin Millions of euro Italy Iberia Latin America Europe and Euro-Mediterranean Affairs Other Total 2019 2,229 (18) (246) 179 2019 1,359 597 27 28 291 (73) 2018 2,140 (116) (251) 142 2018 1,389 514 35 22 231 (51) 2,229 2,140 2019 169 66 (123) 5 (135) (18) 2018 119 80 (104) 1 (212) (116) Change 89 98 5 37 4.2% 84.5% 2.0% 26.1% Change Change -2.2% 16.1% -22.9% 27.3% 26.0% -43.1% 4.2% 42.0% -17.5% -18.3% - 36.3% -84.5% (30) 83 (8) 6 60 (22) 89 50 (14) (19) 4 77 98 The increase in gross operating margin for 2019 is due to: to the increase in services provided by the holding com- > an increase of €50 million in the margin in Italy, the result pany to the other Business Lines of the Group and to a de- mainly of a reduction in costs for leases and rents due to crease in costs for reversal of the provision related to the application of IFRS 16 and their consequent inclusion in the closing of an Enel SpA arbitration in Romania (€13 million). value of right-of-use assets; > an increase in the margin on the “Other” segment related Results by business area 143 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsOperating income Millions of euro Italy Iberia Latin America Europe and Euro-Mediterranean Affairs Other Total 2019 17 19 (122) 3 (163) (246) 2018 39 39 (105) - (224) (251) Change (22) (20) (17) 3 61 5 -56.4% -51.3% -16.2% - 27.2% -2.0% The operating loss in 2019 improved by €5 million, after an of €93 million, which mainly reflected the depreciation of ri- increase in depreciation, amortization and impairment losses ght-of-use assets following application of the new IFRS 16. Capital expenditure Millions of euro Italy Iberia Latin America Europe and Euro-Mediterranean Affairs Other Total 2019 2018 Change 78 46 9 1 45 179 68 28 9 1 36 142 10 18 - - 9 37 14.7% 64.3% - - 25.0% 26.1% The increase in capital expenditure in 2019 can be attributed to increases in Italy and Spain. 144 Consolidated Annual Report 2019Significant events in 2019 Issue of new €1 billion green bond in Europe On January 14, 2019, Enel Finance International NV placed its to a total of €1,000 million and provides for repayment in a third green bond on the European market. The issue amounts single instalment at maturity on July 21, 2025. Funac With Law 20.416 of February 5, 2019, the state of Goiás re- a legal and contractual basis and that, therefore, the actions duced from January 27, 2015 to April 24, 2012 the period of that the state of Goiás has taken in order to fully suspend the operation of the Funac fund and the tax benefit system that application of these laws are patently unfounded. On April 26, allowed Celg Distribuição SA - Celg-D (now Enel Distribuição 2019, Law no. 20.468 was promulgated. With the law, the Goiás) to offset ICMS (tax on the circulation of goods and ser- state of Goiás revoked the tax relief referred to above in its vices, similar to VAT) against the tax credit for Celg-D invest- entirety. On May 5, 2019, Celg-D filed a petition and a request ments to develop and maintain its grid. On February 25, 2019, for a precautionary suspension against the state of Goiás to Celg-D appealed the provisions of Law no. 20.416 of February contest this law. On September 16, 2019, the Court of the sta- 5, 2019 on a precautionary basis (“writ of mandamus”) before te of Goiás denied the petition for precautionary relief, uphol- the Court of the state of Goiás, which denied the appeal on ding the repeal of the tax benefit of the ICMS. On September February 26, 2019. Celg-D appealed this ruling and the Court 26, 2019, Celg-D filed an appeal against the decision denying of the state of Goiás allowed the appeal on June 11, 2019. On the precautionary suspension, claiming that the repeal of the October 1, 2019, the Court of the state of Goiás issued an tax credit law is unconstitutional to the extent that these cre- order revoking the precautionary measure previously granted dits were established in accordance with applicable law and in favor of Celg-D. Celg-D filed an appeal against this deci- constitute acquired rights. sion, claiming that the right to guarantee tax credits has both Amendment of regulatory framework for hydroelectric concessions The changes introduced with Decree Law 135 of December demnities for outgoing concessionaires. These rules will be 14, 2018 (the “Simplification Decree”), ratified into law in Fe- completed with implementing provisions to be enacted by bruary 2019, included the amendment of the criteria for the the regions and the competent authorities. reassignment and extension of concessions and possible in- Disposal of 100% of Mercure Srl On March 1, 2019, the sale of 100% of Mercure Srl was finali- ly adjusted to €168 million, corresponding to the valuation of zed with the receipt of a provisional €162 million, subsequent- the business unit at the reference date of January 1, 2018. Significant events in 2019 145 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsAcquisition of 650 MW of renewables capacity from its North American joint venture EGPNA REP On March 14, 2019, Enel Green Power North America Inc. America Renewable Energy Partners LLC, an equally owned finalized the acquisition of 100% of seven renewable gene- joint venture. The total paid for the transaction amounted to ration plants totaling 650 MW from Enel Green Power North $256 million, for an enterprise value equal to $900 million. Acquisition of Tradewind, a US renewables development company On March 26, 2019, Enel Green Power acquired Tradewind in the United States. The agreement also envisaged the sale Energy, a renewables project development company, which of Savion, a subsidiary of Tradewind, to the Green Investment includes 13 GW of wind, solar and storage projects located Group. Increase in stake in Enel Américas In April 2019, Enel SpA increased its stake in its Chilean sub- share capital from its current 56.8%. sidiary Enel Américas to 56.8% from 51.8% following the On September 3, 2019, Enel SpA successfully completed a settlement of two share swap transactions entered into in capital increase at its Chilean subsidiary Enel Américas SA in October 2018 with a financial institution to acquire up to 5% the total amount of $3 billion. Enel increased its stake in Enel of the share capital of Enel Américas. Américas to 57.26% from its previous holding of 56.8%. On June 28, 2019. Enel SpA entered into two share swap At December 31, 2019, Enel held a total interest of 59.97% contracts with a financial institution to increase its interest in in Enel Américas. its listed Chilean subsidiary Enel Américas SA by up to 5% of Enel refinances hybrid bonds On May 15, 2019, Enel successfully launched a euro-deno- the form of a subordinated hybrid security with a maturity of minated non-convertible bond on the European market in about six years, amounting to €300 million. Resolution of outstanding regulatory issues in Argentina has positive impact for the Enel Group On May 17, 2019, Edesur signed two agreements with the operate within a stable and fully defined framework, with a Argentine government that enabled the settlement of a num- significant positive impact on EBITDA. ber of pending regulatory issues, allowing the Enel Group to Sale of 540 MW of renewables capacity in Brazil On May 31, 2019, Enel Green Power Brasil Participações Ltda ternational Holdings Co. Limited for R$2.9 billion, equivalent closed the sale of 100% of three operational renewables plan- to about €660 million. ts totaling 540 MW to the Chinese company CGN Energy In- 146 Consolidated Annual Report 2019Gradual halt of coal-fired generation in Chile On June 4, 2019, Enel Generación Chile and GasAtacama Chi- ruption of generation at the Tarapacá, Bocamina I and Bocami- le, members of the Enel Chile Group, signed an agreement na II coal-fired plants. with the Ministry of Energy governing the progressive inter- Placement of first “General Purpose SDG Linked Bond” in the world On September 6, 2019, Enel Finance International NV placed stors on the US and international markets. The bond totaled a single-tranche “sustainable” bond for US institutional inve- $1.5 billion, equal to about €1.4 billion. Brindisi plant - Ash dispute With regard to the criminal investigation initiated by the Public ash produced by the thermoelectric plant and the possibility of Prosecutor’s Office of the Court of Lecce in 2017 concerning using that ash in the production of cement. the use of fly ash, in the cement industry, on August 1, 2018, With a notice communicated on June 7, 2019, the Lecce Public the Lecce Public Prosecutor lifted its seizure of the plant, with Prosecutor announced the completion of the preliminary inve- the termination of the judicial custody/administration of the fa- stigation (pursuant to Article 415-bis of the Code of Criminal cility and the restitution of about €523 million to Enel Produzio- Procedure) in relation to the criminal proceedings in question. ne. However, the preliminary investigation is continuing both On July 1, 2019, the brief pursuant to Article 415-bis of the against the accused individuals and the company pursuant to Code of Civil Procedure was filed jointly by all the defendants, Legislative Decree 231/2001. On October 10, 2018, the Defi- requesting that the case against the defendants and the com- nitive Technical Report was filed. On December 6, 2018, the pany be dismissed, given the clear conclusions of the expert investigating magistrate of the Court of Lecce, at the request testimony, which fully confirmed the appropriateness of the of the Public Prosecutor, scheduled a hearing for January 22, ash management process adopted at the Brindisi plant. 2019, to receive testimony from the experts on the report. The On January 9, 2020, the original notices of the preliminary he- investigating magistrate then postponed the hearing until April aring set for January 29, 2020 were received. Due to a number 15, 2019. Following this hearing, the experts reiterated the ac- of irregularities in the notices, the hearing was postponed until curacy of the assessment and the non-hazardous nature of the April 8, 2020. Halt of generation at coal-fired plants in Iberia On September 27, 2019, Endesa SA decided to promote the sites, in compliance with the procedures set out in applicable interruption of generation by the coal-fired plants owned by regulations. Endesa in Iberia and to assess future options for the related Sale of Reftinskaya GRES coal-fired plant in Russia On October 1, 2019, Enel SpA announced that Enel Russia plant to JSC Kuzbassenergo, owned by Siberian Generating had transferred ownership of the Reftinskaya GRES coal-fired Company. Significant events in 2019 147 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsPlacement of first “General Purpose SDG Linked Bond” on the European market On October 10, 2019, Enel Finance International NV launched ked to the achievement of the United Nations Sustainable De- a multi-tranche “sustainable” bond for institutional investors velopment Goals (SDGs) and is the Enel Group’s first “General on the European market totaling €2.5 billion. The bond is lin- Purpose SDG Linked Bond” issued on the European market. Agreement for acquisition of 55% of PayTipperr On November 14, 2019, Enel X reached an accord to acquire 55% of PayTipper, a payment institution with agreements with an extensive network of sales outlets. Increase in stake in Enel Chile by up to 3% On December 5, 2019, Enel SpA entered into two share swap in its listed Chilean subsidiary Enel Chile SA by up to 3% from agreements with a financial institution to increase its interest the current holding of 61.9%. Early redemption of hybrid bond On December 5, 2019, Enel SpA exercised its early call option in accordance with the terms and conditions envisaged in the for the listed hybrid bond issued on January 15, 2014 on the prospectus of January 10, 2014. Irish Stock Exchange with a nominal value of €1,000 million, Endesa industrial relations After a series of meetings of the Comisión Negociadora del V before the Servicio Interconfederal de Mediación y Arbitraje Convenio Colectivo de Endesa (Comisión Negociadora) whi- (SIMA) aimed at resolving the main issues connected with ch began in October 2017 and continued throughout 2018, the 5th Endesa Collective Bargaining Agreement. in view of the impossibility of reaching an agreement, Ende- Accordingly, the proceeding before the Supreme Court is con- sa notified the workers and their union representatives that, tinuing with the three minority unions that had initially initia- with effect from January 1, 2019, the 4th Endesa Collective ted the suit together with the larger union. Bargaining Agreement must be considered terminated in the In parallel, numerous individual suits have been filed by re- same way as the “framework guarantee contract” and the tired staff and ex-employees who had participated in the re- “agreement on the voluntary suspension or resolution of em- tirement incentive agreements (AVS) to judicially ascertain ployment contracts in the period 2013-2018”, applying from that the termination of the 4th Endesa Collective Bargaining that date the provisions of general labor law, as well as the Agreement would not impact them. Currently, the majority legal criteria established in the matter. of these proceedings have been suspended or are being su- In December 2019, the most representative union at Ende- spended, pending a ruling on the collective issue before the sa decided to abandon the suit pending before the Supreme Supreme Court, on whose outcome these proceedings de- Court to voluntarily participate in an arbitration proceeding pend. 148 Consolidated Annual Report 2019Regulatory and rate issues The European regulatory framework “Clean Energy for all Europeans” legislative package The “Clean Energy for all Europeans” legislative package, pro- posed by the European Commission in 2016, laid the founda- tion necessary for achieving greater integration and regionali- zation of markets for electricity, balancing, flexibility services and capacity. Following the inter-institutional agreement rea- ched in 2018, the following regulations and directives com- pleting the package were published in the Official Journal of the European Union on June 14, 2019: the Electricity Market Regulation (2019/943), the ACER Regulation (2019/942), the Risk Preparedness Regulation (2019/941) and the Electricity was published in the Official Journal of the European Union on April 25, 2019 and entered force on May 15, 2019. Regulation (EU) 2019/1242 setting CO2 emission performance standards for new heavy-duty vehicles for 2025 and 2030 was published in the Official Journal of the European Union on July 25, 2019 and entered force on August 14, 2019. Finally, Directive (EU) 2019/1161 on the promotion of clean and energy-efficient road transport vehicles was published in the Official Journal of the European Union on July 12, 2019 and entered force on August 1, 2019. While the regulations will be directly applicable fol- lowing the publication of the text in the Official Journal of the European Union, the directive will have to be transposed with specific legislation in the Member States within two years of Market Directive (2019/944). The measures entered force on entry into force. July 4, 2019, with the regulations taking immediate effect, while the directive must be transposed into the law of the various EU countries by December 31, 2020. The new legislation fosters the integration of the different te- chnologies and the participation of diverse market operators. It also opens up the possible development of mechanisms to provide long-term signals to investment in decarbonization (e.g. auctions, PPAs) and the adequacy of the electricity sy- stem (the capacity market). The “Clean Mobility” legislative package The “Clean Mobility” legislative package, proposed by the European Commission in three separate packages between 2017 and 2018, contains a series of legislative proposals and other initiatives intended to make traffic safer, reduce CO2 emissions and air pollution, support the development of zero- and low-emission vehicles and the creation of a supply chain for the production of European batteries. In 2019, following an inter-institutional agreement reached in 2018, the final legi- slation completing the package was published in the Official Journal of the European Union. Regulation (EU) 2019/631 set- ting CO2 emission performance standards for new passenger cars and for new light commercial vehicles for 2025 and 2030 Sustainable finance In December 2019 the European Parliament and the Council of the European Union reached an agreement on a proposed regulation on a classification system for sustainable econo- mic activities (taxonomy), with the aim of enhancing private and public investments to finance the transition to a climate neutral and green economy. Formal approval of the regulation is expected to come in the 1st Quarter of 2020. Also in December 2019, a regulation concerning low-carbon benchmarks and positive carbon impact benchmarks was formally approved (amending the previous Regulation (EU) 2016/1011). The two regulations are part of a sustainable finance packa- ge, which also includes a proposal for a regulation on disclo- sures relating to sustainable investment and sustainability risks, amending Directive (EU) 2016/2341 (IORPs), and the establishment of a European green bond standard to increa- se transparency and comparability in this market, in support of sustainable finance. Regulatory and rate issues 149 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements“European Green Deal” Communication On December 11, 2019, the European Commission presen- ted the “European Green Deal” (EGD). The communication outlines a series of initiatives aimed at enabling European citi- zens and businesses to benefit from a green and sustainable transition. It is an integral part of the European Commission’s strategy to implement the United Nations’ 2030 agenda for sustainable development. The European Green Deal includes initiatives on climate, environment, industrial strategy, green finance, financing, sustainability and society and legislative proposals that will be presented in 2020 and 2021. > The Commission will propose the first European ‘Climate Law’ by March 2020, aimed at reflecting greater climate ambition and enshrining the 2050 European climate neu- trality objective in legislation. > An assessment of measures to increase the EU’s gre- enhouse gas emission reductions target for 2030 to at le- ast 50% and towards 55% (replacing the current reduction target of 40%) is also envisaged. To this end, the Europe- an Commission will launch a review of all relevant clima- te-related policy instruments in order to align them with the new climate targets. This will comprise the Emissions Trading System (ETS) and the possibility of extending it to new sectors, the Energy Taxation Directive and the intro- duction of a “carbon border adjustment mechanism” for specific sectors aimed at reducing the risk of “carbon lea- kage” and preserving the competitiveness of EU industry. > The update of the national energy and climate plans envi- saged in 2023 will be assessed with a view to increasing climate ambitions and supporting renewable energy. In ad- dition, a process will be launched to review the legislative dossiers relating to energy and the development of energy infrastructures. > During 2020, initiatives will be proposed to support offsho- re wind and the smart integration of various sectors. > A new industrial strategy aimed at achieving the climate neutrality objective and an action plan for the circular eco- nomy are expected in March 2020. Furthermore, support for IPCEIs, large alliances and new forms of cooperation with industry and support for investments in strategic va- lue chains will be strengthened. > In 2020, a strategy for sustainable and intelligent mobility will be presented aimed at making transport more efficient and cleaner. In addition, the Commission will propose the phasing out of fossil fuel subsidies, the extension of the ETS to the maritime sector, the revision of TEN-T and the Alternative Fuels Infrastructure Directive and the revision of the regulations concerning pollution and greenhouse gas emissions for internal combustion vehicles. > A new initiative will be presented aimed at promoting bu- ilding renovation with the aim of combating both climate change and energy poverty, and the extension of the ETS to include emissions from buildings will be considered. > An action plan to reduce air, water and soil pollution will be adopted in 2021, including a revision of air quality stan- dards and measures to address pollution from large indu- strial plants. > A proposal will be advanced for a new sustainable invest- ment plan that includes a “just transition mechanism” and “just transition fund” aimed at helping vulnerable regions and sectors that are heavily dependent on fossil fuels and mobilizing the funds necessary to achieve the objectives of the European Green Deal. > The European Investment Bank (EIB) will be transformed into a “climate bank” by allocating 50% of all lending to projects aimed at achieving climate objectives. > Resources in EU funding programs will be reallocated so that at least 25% of their budgets go to climate-related projects and activities (30% of the InvestEU Fund). > By 2021, EU guidelines on state aid, including environmen- tal and energy aid, will be revised, while support will be given to national tax reforms designed to increase public investment by EU countries to achieve the objectives set out in the European Green Deal. State aid rules After the lengthy reform of the rules governing state aid ini- tiated in 2012, known as “State Aid Modernization”, the Euro- pean Commission has decided to prolong the validity of the regulations, communications and guidelines expiring in 2020 until 2021. At the same time, the Commission began a review process for state aid rules, which will be completed by the end of 2021. Last July, the first phase of a public consultation on aid for environmental protection and energy was completed (Com- munication 2014/C 200/01 and Section 7 of Regulation (EU) no. 651/2014). The guidelines involved in the evaluation were considered effective, however most responses underscored the need for a revision of state aid rules to ensure consisten- cy with current technological and economic developments. 150 Consolidated Annual Report 2019These initiatives, which lie within the exclusive remit of the defined state aid as an essential component of the effective European Commission, fall within the more general fra- development of policies to achieve climate neutrality by 2050. mework of the European Green Deal and the EU’s ambitious State aid is an instrument to mobilize additional national re- decarbonization objectives. The Commission has repeatedly sources to support those deployed at the European level. Regulatory framework by business area Thermal Generation and Trading Latin America Chile Italy The essential plants of Assemini and Portoferraio have been Rate revision - Introduction of the Transitional Electricity declared eligible for cost reimbursement for 2019 and 2020. Price Stabilization Mechanism The Brindisi Sud and Sulcis plants were declared eligible for On November 2, 2019, Law 21.185 of the Ministry of Ener- the 2019-2020 period. gy was published. It introduced a Transitional Electricity Pri- The Porto Empedocle plant is eligible for long-term cost reim- ce Stabilization Mechanism for customers on the regulated bursement until 2025. market. Consequently, the prices to be charged to regulated For 2019 and 2020, the remaining part of essential capacity customers in the 2nd Half of 2019 were set at the level of was contracted under alternative contracts which under cur- those applied in the 1st Half of 2019 (Decree 20T/2018) and rent regulations require the supply of capacity to the ancillary were defined as “Stabilized Prices for Regulated Customers” services market for a fixed premium. (PEC). In 2019, the Regulatory Authority for Energy, Networks and Between January 1, 2021 and the termination of this mecha- the Environment (ARERA) adopted a series of measures re- nism, the prices charged will be those set every six months garding the reimbursement of costs to essential plants. More on the basis of Article 158 of the Electricity Act and cannot specifically, they regarded: exceed the PEC adjusted for consumer price inflation. > the final adjustment for 2016 for the Assemini and Porto- Any differences between the amount billed in application of ferraio plants; the stabilization mechanism and the theoretical bill determi- > payments on account for 2018 for the Brindisi Sud, Asse- ned on the basis of considering the price that would have mini, Porto Empedocle and Portoferraio plants; been applied under the terms of contracts with the various > payments on account for 2019 for the Brindisi Sud, Asse- electricity distribution companies will be recognized by gene- mini, Porto Empedocle and Sulcis plants. rators as receivables for invoices to be issued, up to an overall On June 28, 2019, the Minister for Economic Development be recognized in US dollars and will not accrue interest until issued a decree approving the definitive rules governing the the end of 2025. Any imbalances in favor of the generation capacity remuneration mechanism (the capacity market). On companies will have to be recovered no later than December maximum of $1,350 million until 2023. These differences will November 6 and November 28, 2019 two auctions were held 31, 2027. with delivery in 2022 and 2023 respectively: Enel was awar- ded capacity for both years. Some operators and a sectoral Enel Green Power trade association contested the decree and the results of the two auctions. A decision is pending before the Lombardy Re- gional Administrative Court in Milan. Italy The Ministerial Decree of July 4, 2019 provided for competi- tive procedures based on Dutch auctions and registers, de- ARERA has confirmed the transitional capacity remuneration pending on the installed capacity and by technology groups, mechanism (the so-called “capacity payment”) for the years including photovoltaic systems. In particular, up to September 2020 and 2021, so as to ensure continuity with the new ca- 2021, seven procedures will be held with: pacity market, which will produce a financial impact starting > Dutch auctions for plants with a capacity of more than 1 MW; from 2022. > registers for plants with a capacity of less than 1 MW. Regulatory and rate issues 151 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsUnlike previous decrees, the Ministerial Decree of July 4, Resource Plan or IRP). IRP 2019 envisages the withdrawal of 2019 provides for a new method for supporting renewable 11 GW of coal capacity by 2030 (in parallel with 1,500 MW of sources through two-way contracts for differences under whi- new coal-fired plants). Furthermore, again by 2030, 6 GW of ch the successful tenderer returns any positive differences new solar photovoltaic and 14.4 GW of new wind are planned. between the zonal price and the auction price. The Carbon Offset Regulations have been published. They will These incentive mechanisms will terminate when an indicati- allow renewable energy plants that meet certain requiremen- ve cumulative annual cost of the incentives reaches €5.8 bil- ts to generate emission reduction credits and to sell them to lion. At November 30, 2019 the indicative annual cumulative companies subject to the carbon tax. cost was around €5.0 billion. Europe and Euro-Mediterranean Affairs Greece Last December, Law 4643/2019 was approved, transposing Australia The most important political event of the year was the fede- ral election in May 2019, which saw the re-election of the conservative Liberal Party, which is in favor of a coal-based energy policy. The election result led to a slowdown in the re- European legislation on priority dispatch and liberalizing ac- newable energy market, with a significant decline in capacity cess to forms of long-term bilateral contracting for the sale of under development (-60% compared with the investments electricity from renewable sources. recorded in the previous year according to BNEF). The sta- Also in December, the Ministry of Energy applied to the Euro- lemate is exacerbated by the complexity and length of con- pean Commission for extension of the current remuneration nection and permitting processes. mechanisms for interruptibility services (Security of Supply These developments are complicated by the uncertain Transitional Duty - SSTD and Transitory Flexibility Remunera- outcome of two procedures (Coordination of Generation and tion Mechanism - TFRM). Both mechanisms expired at the Transmission Investment - Post 2025 Market Design for the end of 2019. The SSTD, which has operated since 2016, is NEM) currently under way, which could lead to the overall re- financed by all electricity producers, in particular renewable definition of the National Electricity Market (NEM). However, generators, based on revenue. The TFRM is funded by electri- the draft decisions prepared to date by the competent autho- city consumers. rities confirm some of the schemes deemed ineffective by Greece has approved an ambitious national energy and cli- most investors (e.g. management of losses on transmission mate plan, which sets new targets for the development of networks). renewable sources equal to 35% of final gross energy consu- mption and includes a plan for the gradual closure of lignite-fi- red plants by 2023. India Last year saw the re-election of Prime Minister Modi, whi- During 2019, competitive auctions awarded long-term supply ch will continue his policy of supporting renewables over the contracts for approximately 1 TW of wind and photovoltaic next five years. 12 GW were installed in 2019 alone, bringing capacity. Bulgaria With the amendments of the energy law introduced last May, renewables capacity in the country to 86 GW. Various regulatory measures have been introduced to encou- rage renewables, including a 25-year exemption from tran- smission costs for wind and solar projects and a the reduction the incentive mechanism for renewable generation plants in the corporate tax from 34% to 25%. with a capacity of between 1 and 4 MW has changed. Star- ting from January 1, 2019, electricity generated by renewable plants will be sold through the Bulgarian energy exchange (IBEX) and will take account of spot electricity prices. Africa, Asia e Oceania South Africa The main event was the publication in October 2019 of the Infrastructure and Networks Italy The rate for the fifth regulatory period (2016-2023) is gover- ned by ARERA Resolution no. 654/2015/R/eel. This period lasts eight years and is divided into two sub-periods of four years each (NPR1 for 2016-2019 and NPR2 for 2020-2023). new long-term electrical development plan (the Integrated With regard to the NPR2 period, on December 27, 2019 ARE- 152 Consolidated Annual Report 2019RA published Resolution no. 568/2019/R/eel, with which it rate subsidy to be paid to distributors with Resolution no. updated rates for distribution and metering services in force 529/2019/R/efr. in the 2020-2023 period, publishing the new integrated texts (TIT 2020-2023 and TIME 2020-2023), substantially confirming the pre-existing regulatory framework regarding the return on Grid Code ARERA issued Resolution 50/2018/R/eel, which introduces a capital and depreciation and making only a few changes to the reimbursement mechanism for non-recoverable receivables methods for recognizing operating costs. of distribution companies in respect of the general system With Resolution no. 639/2018/R/com, ARERA set the value of charges paid to the Energy and Environmental Services the WACC for distribution and metering activities, valid for the Fund (CSEA) and Energy Services Operator (GSE) but not 2019-2021 period, at 5.9%, up 0.3 points compared with the collected by defaulting sellers whose transport contract has 5.6% in force for 2016-2018. been terminated. The provision permits the recognition of re- As for distribution and metering rates, ARERA approved both ceivables accrued as from January 2016. This resolution was the definitive reference rates for 2018, calculated by taking also challenged by a number of operators and a consumer into account the actual balance sheet data for 2017 (Resolu- association, but all appeals were denied and the rulings are tion no. 76/2019/R/eel), and the provisional reference rates for definitive. 2019 on the basis of the preliminary balance sheet data for Resolution no. 495/2019/r/eel also provided for the payment 2018 (Resolution no. 117/2019/R/eel). The definitive reference by March 2020 of default interest on the system charges rates for 2019 are expected to be published in the early mon- requested from distribution companies with order of 2018, ths of 2020. while, once fully operational, that will be replaced by legal interest automatically calculated by CSEA. With regard to service quality, ARERA, with Resolution no. With Resolution no. 655/2018/R/eel, ARERA intervened to sup- 646/2015/R/eel as amended, established output-based regula- plement the CADE in order to allow the termination of a tran- tion for electricity distribution and metering services, including sport contract even in the event of failure to adjust guarantees the principles for regulation for 2016-2023 (TIQE 2016-2023). following changes in turnover/number of customers. This resolu- With Resolution no. 566/2019/R/eel, ARERA completed the tion was also challenged by an operator and the judgment is cur- update of the TIQE for the 2020-2023 semi-period, proposing rently pending before the Milan Regional Administrative Court. tools to bridge gaps in quality of service still existing between In response to traders failing to reinstate enforced guarantees, the various areas of the country, taking account of the time or failure to pay transport service fees, e-distribuzione sought to needed to implement interventions on the grid as well as the terminate certain transport contracts, with the consequent filing effects of climate change. of new suits (additional to those previously filed as a precautio- With Resolution no. 534/2019/R/eel, ARERA published the list nary measure to hinder the procedures for enforcing the sure- of interventions in the 2019-2021 Resilience Plan of e-distri- ties initiated by e-distribuzione following the non-payment of the buzione eligible for the bonus-penalty mechanism envisaged fees invoiced to the traders, all of which were decided in favor of under the provisions of Resolution no. 668/2019/R/eel, which e-distribuzione ), with which the traders are contesting the termi- introduced an incentive mechanism for investments to incre- nation of the contract and claiming damages. e-distribuzione is ase the resilience of distribution grids in terms of resistance participating in the proceedings in order to contest the plaintiffs’ to loads deriving from extreme weather events. opposing and to request payment, in a counterclaim, where ne- Energy efficiency - White certificates With decision no. 2538/2019 published on November 28, 2019, the Lombardy Regional Administrative Court, ruling that cessary, of its receivable in respect of the traders. Europe and Euro-Mediterranean Affairs the Ministry for Economic Development did not have jurisdi- ction, voided the part of Interministerial Decree of May 10, Romania In 2019, the first year of the fourth regulatory cycle, the national 2018 setting the cap on the rate subsidy pertaining to distribu- regulatory authority ANRE revised the assumptions underlying tion companies at €250/EEC and, consequently, Resolutions the calculation of regulated revenue up to the year 2023, adop- no. 487/2018/R/efr and no. 209/2019/R/efr, with which ARE- ting a structure closer to the Enel business model. The effects RA had updated the rules for determining the rate subsidy. were favorable for distribution activities for the 2019 financial As a result, ARERA initiated a procedure for amending the year as well. Furthermore, thanks to a government decision, Regulatory and rate issues 153 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsthe regulated rate of return was increased from 5.66% to 6.9% bruary 1, 2019, based on consumer price inflation, established with the aim of increasing investment in grids. with Resolution SGE 366/2019. It also includes an increase in Latin America Brazil the FNEE, which went from $15.5/MWh to $80/MWh. The second resolution (26/2019) approved the new distribution ra- tes, which took effect from the same date (February 1, 2019), establishing that the increases of February 2019 in the VAD (Aggregate Distribution Value) will be applicable from March Rate revision for Enel Distribuição Rio (2019) 1, 2019. The changes reflect the variation of 23.57% in the The rate revision of Enel Distribuição Rio provisionally appro- MMC from August 23, 2018 to February 19, 2019, the X factor ved on March 13, 2018, in accordance with Resolution no. of -5.42% and the Q factor (investments) of 1.74%. 2.377, was subsequently approved by the regulatory authority ANEEL on March 12, 2019, resulting in an average increase for customers of around 9.70%. This increase applied from March 15, 2019 to March 31, 2019. End-user Markets Italy Extraordinary rate revision for Enel Distribuição Rio (2019) On March 20, 2019, ANEEL authorized the Cámara de Comer- cialização de Energia Elétrica (CCEE) to finalize the agreement Electricity With Resolution no. 706/2018/R/eel, ARERA updated for with eight banking groups to bring forward payment of the 2019 the rate component covering the marketing costs of the CDE-ACR (the so-called “rate deficit”) for September 2019. operators of the enhanced protection service (RCV) and the This decision was reflected in the rates applied by Enel Distri- levels of the PCV fee, which represents the reference price buição Rio, which increased by 7.59%. for sellers on the free market. Resolution no. 576/2019/R/eel These rates apply to the period from April 1, 2019 to March updated the levels of the RCV and PCV for 2020. 14, 2020. With Resolution no. 119/2019/R/eel, ARERA introduced me- asures to enhance the efficiency of managing fraudulent wi- Rate revision for Enel Distribuição Ceará (2019) thdrawals of power by end users in the enhanced protection On April 18, 2019, ANEEL approved the fifth periodic revision market and amended the existing compensation mechanism of the rates of Enel Distribuição Ceará, which applied as from for the amounts not collected in respect of such withdrawals. April 22, 2019. The average increase was 8.22%. Servizio Elettrico Nazionale has appealed the resolution and the related judgment is pending before the Lombardy Regio- Rate revision for Enel Distribuição São Paulo (2019) nal Administrative Court in Milan. On July 2, 2019, ANEEL approved the fifth periodic revision of the rates of Enel Distribuição São Paulo, which applied as from April 22, 2019. The new rates produced an average in- crease of 7.03%. Gas With resolution no. 32/2019/R/gas ARERA established the rules for settling financial items between sellers and end users for the 2010- The next rate review is expected in four years. 2012 period with regard to the gas commodity for the safeguard service, in compliance with the Council of State ruling 4825/2016. Rate revision by Enel Distribuição Goiás (2019) With Resolution no. 707/2018/R/gas, ARERA updated the QVD On October 22, 2019, ANEEL approved a new rate revision component of the financial conditions of the natural gas safeguard for Enel Distribuição Goiás, which took effect from the same service for 2019. Resolution no. 577/2019/R/gas updated the QVD date. The new rates produced an average decrease of 3.90%. for 2020. Argentina Decree Law 162 of December 30, 2019 (the “Milleproroghe” om- nibus extension act), currently being ratified into law, extended the date previously set for eliminating price protection mechanisms Rate revision for Edesur (2019) in the electricity and gas sectors from July 1, 2020 to January 1, On February 1, 2019, Resolutions ENRE 24/2019 and 26/2019 2022. were published in the Official Journal. The first approved the values of the rate table to be applied with effect from Fe- 154 Consolidated Annual Report 2019Iberia Spain Energy efficiency Russia Gas market The order of Russia’s Federal Antimonopoly Service concer- ning the indexation of gas rates for the 2nd Half of 2019 and Law 18/2014 of October 15 containing urgent measures for the 1st Half of 2020 was published on June 6, 2019. Gas growth, competition and efficiency created a National Energy prices for industrial uses in the regions in which Enel power Efficiency Fund to help achieve energy efficiency objectives. plants operate increased by 1.4% compared with the 1st Half The TEC/332/2019 decree of March 20 established that Ende- of 2019. sa would be required to make a contribution for 2019 of €29 million to the National Energy Efficiency Fund. The TEC/1080/2019 decree of October 23 established Ende- sa’s share of financing of the Bonus Social for 2019 at 36.26%, compared with the previous 37.15%. Europe and Euro-Mediterranean Affairs Romania Electricity market Following a government emergency order issued in late 2018, which represented a step backwards in the process of deregulating the electricity and gas markets in Romania, customers who had elected to enter the free market were au- thorized to return to the regulated regime, generating losses for service providers in the free market. These losses were caused by the decision of the national regulatory authority ANRE to not reimburse the total costs incurred to provision electricity supplied to end users in the regulated regime. This continued in 2019. At the end of 2019 and throughout 2020, the national regulatory authority adopted a series of regulated bilateral wholesale contracts with low-cost generators for the protected retail segment that will enable recovery of the los- ses of the past two years. Ireland Capacity market Following the proposal of the capacity market operator, which was presented in June 2018 and approved by the Irish energy regulators, as from October 1, 2019, demand response re- sources were de-rated by 33%, with an adverse impact on their commercial value. Regulatory and rate issues 155 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements156 Relazione Finanziaria Annuale 20195. OUTLOOK REPORT ON OPERATIONS Outlook The 2020-2022 Strategic Plan, presented in November 2019, ture in support of decarbonization and electrification. The ex- is founded on a sustainable and fully integrated business pected contribution to EBITDA growth is about €1.1 billion. model that the Group has adopted since 2015. It is designed to enable Enel to seize the opportunities presented by the energy transition and linked to the global trends that are sweeping through the energy industry: decarbonization and electrification. The digitalization of grids and the adoption of platforms for all customer-related activities will be enablers of the Group’s strategy, which aims to accelerate the growth of renewables to offset a reduction in thermal generation. More specifically, the 2020-2022 Investment Plan envisages that: > investments in decarbonization will amount to about Overall, the Group expects to invest €28.7 billion over the course of the plan, producing forecast EBITDA of €20.1 billion in 2022. More than 90% of investments will directly impact three main SDGs: SDG 7 (Affordable and Clean Energy), SDG 9 (Industry, Innovation and Infrastructure) and SDG 11 (Sustai- nable Cities and Communities), thus contributing to SDG 13 for climate action. Under our dividend policy, over the plan period Enel will con- tinue to pay out a dividend equal to the greater of 70% of consolidated ordinary net income and a guaranteed minimum €14.4 billion (50% of total capex) and will be aimed at de- dividend per share, with a compound annual growth rate of veloping new renewable capacity and gradually replacing 8.6% for the implicit DPS and 7.7% for the minimum DPS. conventional generation assets. Decarbonization’s contri- Expectations for 2020 envisage: bution to EBITDA growth will be equal to €1.4 billion over > an acceleration of investment in support of industrial the plan period. Renewable capacity is expected to reach growth to drive decarbonization, in renewable energy, es- 60% of total capacity in three years, driving the increase in pecially in Latin America and North America; the profitability of plant assets and increasing output with > further progress in the digitalization of distribution grids, zero CO2 emissions to 68% of the total in 2022. The sharp acceleration in the growth of renewables will support the mainly in Italy and Latin America, with the aim of improv- ing the service quality and increasing grid flexibility and Group’s pursuit of the goal of achieving total decarboniza- resilience; tion of the generation mix by 2050; > an increase in investment devoted to the electrification > about €1.2 billion of investment will be dedicated to the of energy consumption, with the aim of leveraging the electrification of energy consumption, leveraging the expansion of the customer base, and to continuous effi- growth and diversification of the retail customer base and ciency enhancement, supported by the creation of global the efficiencies associated with the transfer of activities to business platforms. platforms. The expected contribution of these investments The progress achieved for each of the enabling factors and to the Group’s EBITDA growth amounts to €0.4 billion; the fundamental principles of the Strategic Plan enable us to > some €13 billion will be invested in the factors enabling confirm our financial targets for 2020. Furthermore, based the energy transition, infrastructure and ecosystems and platforms, to improve the quality and resilience of grids on the key elements set out above, the financial targets un- derpinning the Group’s 2020-2022 Strategic Plan are outlined through digitalization and creating services and infrastruc- below. 158 Consolidated Annual Report 2019Financial targets Ordinary EBITDA (€bn) Net ordinary income (€bn) Pay-out ratio Implicit DPS (€/share) Minimum dividend per share (€) 2019 17.9 4.8 70% 0.328 0.32 2020 18.6 5.4 70% 0.37 0.35 2021 19.4 5.8 70% 0.40 0.37 2022 20.1 6.1 70% 0.42 0.40 CAGR (%) 2019- 2022 +3.9% +8.3% - +8.6% +7.7% 159 OutlookEnel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsOther information Non-EU subsidiaries At the date of approval by the Board of Directors of the finan- Chilean company belonging to Enel Chile); 16) Enel Gen- cial statements of Enel SpA for 2019 – March 19, 2020 – the Enel Group meets the “conditions for the listing of shares of companies with control of over companies established and regulated under the law of non-EU countries” (hereinafter “non-EU subsidiaries”) established by CONSOB with Article 15 of the Markets Regulation (approved with Resolution no. 20249 of December 28, 2017). Specifically, we report that: > in application of the materiality criteria for the purposes of consolidation referred to in Article 15, paragraph 2, of the CONSOB Market Regulation, 32 non-EU subsidiaries of the Enel Group have been identified to which the rules in question apply on the basis of the consolidated accounts of the Enel Group at December 31, 2018; eración Perú SAA (a Peruvian company belonging to Enel Américas); 17) Enel Green Power Brasil Participações Ltda (a Brazilian company belonging to Enel Green Power); 18) Enel Green Power Chile Ltda (a Chilean company belong- ing to Enel Chile); 19) Enel Green Power del Sur SpA (a Chilean company belonging to Enel Chile); 20) Enel Green Power Diamond Vista Wind Project LLC (a US company belonging to Enel North America); 21) Enel Green Pow- er Rattlesnake Creek Wind Project LLC (a US company belonging to Enel North America); 22) Enel Green Power RSA (Pty) Ltd (a South African company belonging to Enel Green Power); 23) Enel Green Power Perú SAC (a Peruvian company belonging to Enel Green Power); 24) Enel Kan- sas LLC (a US company belonging to Enel North America); > they are: 1) Ampla Energia e Serviços SA (a Brazilian com- 25) Enel North America Inc. (formerly Enel Green Power pany belonging to Enel Américas); 2) Celg Distribuição SA North America Inc., a US company controlled directly by - Celg-D (a Brazilian company belonging to Enel Américas); Enel SpA); 26) Enel Perú SAC (a Peruvian company be- 3) Codensa SA ESP (a Colombian company belonging longing to Enel Américas); 27) Enel Russia PJSC (a Rus- to Enel Américas); 4) Companhia Energética do Ceará - sian company controlled directly by Enel SpA); 28) Enel X Coelce (a Brazilian company belonging to Enel Américas); North America Inc. (a US company belonging to Enel X); 5) Eletropaulo Metropolitana Eletricidade de São Paulo 29) Gas Atacama Chile SA (a company merged into Enel SA (a Brazilian company belonging to Enel Américas); 6) Generación Chile SA on October 1, 2019); 30) Geotérmica Emgesa SA ESP (a Colombian company belonging to Enel del Norte SA (a Chilean company belonging to Enel Chile); Américas); 7) Empresa Distribuidora Sur SA - Edesur (an 31) Rock Creek Wind Project LLC (a US company belong- Argentine company belonging to Enel Américas); 8) Enel ing to Enel North America); 32) Thunder Ranch Wind Proj- Américas SA (a Chilean company controlled directly by ect LLC (a US company belonging to Enel North America); Enel SpA); 9) Enel Brasil SA (a Brazilian company belong- ing to Enel Américas); 10) Enel Brasil Investimentos Sud- > the balance sheet and income statement of the above este SA (a company merged into Eletropaulo Metropoli- companies included in the reporting package used for tana Eletricidade de São Paulo SA on November 6, 2019); the purpose of preparing the 2019 consolidated financial 11) Enel Chile SA (a Chilean company controlled directly statements of the Enel Group will be made available to by Enel SpA); 12) Enel Distribución Chile SA (a Chilean the public by Enel SpA (pursuant to Article 15, paragraph company belonging to Enel Chile); 13) Enel Distribución 1a) of the Market Regulation) at least 15 days prior to the Perú SAA (a Peruvian company belonging to Enel Améri- day scheduled for the Ordinary Shareholders’ Meeting cas); 14) Enel Fortuna SA (a Panamanian company belong- called to approve the 2019 financial statements of Enel ing to Enel Green Power); 15) Enel Generación Chile SA (a SpA together with the summary statements showing the 160 Consolidated Annual Report 2019essential data of the latest annual financial statements of > Enel SpA has verified that the above subsidiaries: subsidiaries and associated companies (pursuant to the - provide the auditor of the Parent Company, Enel SpA, applicable provisions of Article 77, paragraph 2-bis, of the with information necessary to perform annual and in- CONSOB Issuers Regulation approved with Resolution no. 11971 of May 14, 1999); > the articles of association and composition and powers of the control bodies from all the above subsidiaries have been obtained by Enel SpA and are available in updated form to CONSOB where the latter should request such information for supervisory purposes (pursuant to Article 15, paragraph 1b) of the Markets Regulation); terim audits of Enel SpA (pursuant to Article 15, para- graph 1 (letter c-i) of the Markets Regulation); - use an administrative and accounting system appro- priate for regular reporting to the management and auditor of the Parent Company, Enel SpA, of income statement, balance sheet and financial data necessary for preparation of the consolidated financial statements (pursuant to Article 15, paragraph 1 (letter c-ii) of the Markets Regulation). Approval of the financial statements The Shareholders’ Meeting called to approve the financial days from the close of the financial year, permitted under Ar- statements, as provided for by Article 9.2 of the Bylaws of ticle 2364, paragraph 2, of the Italian Civil Code, is justified by Enel SpA, shall be called within 180 days of the close of the the fact that the Company is required to prepare consolidated financial year. financial statements. The use of that time limit rather than the ordinary limit of 120 Disclosures on financial instruments The disclosures on financial instruments required by Article nagement”, note 33 “Derivatives and hedge accounting” and 2428, paragraph 2, no. 6-bis of the Italian Civil Code are re- note 34 “Fair value measurement” to the separate financial ported in note 31 “Financial instruments”, note 32 “Risk ma- statements of Enel SpA. Transactions with related parties and disclosures For more information on transactions with related parties, please see note 49 to the consolidated financial statements. Own shares As of December 31, 2019, treasury shares are represented The Shareholders’ Meeting authorized the Board of Directors by 1,549,152 ordinary shares of Enel SpA with a par value of to purchase treasury shares in order to pursue the purposes €1.00 each, purchased through a qualified intermediary for a of the 2019 LTI Plan. total value of €10 million. Other information 161 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsAtypical or unusual operations Pursuant to the CONSOB Notice of July 28, 2006, Enel did for calculating the transfer price or timing could give rise to not carry out any atypical or unusual operations in 2019. doubts concerning the propriety and/or completeness of di- Such operations include transactions whose significance, sclosure, conflicts of interest, preservation of company as- size, nature of the counterparties, subject matter, method sets or protection of minority shareholders. Subsequent events Significant events following the close of the year are discussed in note 54 to the consolidated financial statements. Reconciliation of shareholders’ equity and net income of Enel SpA and the corresponding consolidated figures Pursuant to CONSOB Notice no. DEM/6064293 of July 28, results for the year and shareholders’ equity with the corre- 2006, the following table provides a reconciliation of Group sponding figures for the Parent Company. Millions of euro Income statement Shareholders’ equity Income statement Shareholders’ equity Financial statements - Enel SpA Carrying amount and impairment adjustments of consolidated equity investments Shareholders’ equity and net income (calculated using harmonized accounting policies) of the consolidated companies and groups and those accounted for using the equity method, net of non-controlling interests Translation reserve Goodwill Intercompany dividends Elimination of unrealized intercompany profits, net of tax effects and other minor adjustments TOTAL SHAREHOLDERS OF THE PARENT COMPANY NON-CONTROLLING INTERESTS CONSOLIDATED FINANCIAL STATEMENTS at Dec. 31, 2019 at Dec. 31, 2018 4,792 211 29,586 (82,098) 3,456 (548) 27,943 (78,109) 4,428 75,304 7,263 73,975 - (27) (7,160) (70) 2,174 1,302 3,476 (3,802) 14,241 - (2,854) 30,377 16,561 46,938 - (3) (4,836) (543) 4,789 1,561 6,350 (3,317) 14,273 - (3,045) 31,720 16,132 47,852 162 Consolidated Annual Report 2019Other information 163 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements164 Relazione Finanziaria Annuale 20196. CONSOLIDATED FINANCIAL STATEMENTS 165 Xxxxxxxxx XxxxxxxxxxxConsolidated financial statements Consolidated Income Statement Millions of euro Notes 2019 2018 of which with related parties of which with related parties 5,387 38 7,737 2,644 272 10 59 55 Revenue Revenue from sales and services (1) Other income Costs Electricity, gas and fuel purchases (1) Services and other materials (1) Personnel Net impairment/(reversals) of trade receivables and other receivables Depreciation, amortization and other impairment losses Other operating expenses (1) Capitalized costs Net income/(expense) from commodity risk management (1) Operating income Financial income from derivatives Other financial income Financial expense from derivatives Other financial expense Net income/(expense) from hyperinflation Share of income/(losses) of equity investments accounted for using the equity method Income before taxes Income taxes Net income from continuing operations Net income from discontinued operations Net income for the year (shareholders of the Parent Company and non controlling-interests) Attributable to shareholders of the Parent Company Attributable to non-controlling interests Basic earnings/(loss) per share attributable to shareholders of the Parent Company (euro) Diluted earnings/(loss) per share attributable to shareholders of the Parent Company (euro) Basic earnings/(loss) per share from continuing operations attributable to shareholders of the Parent Company (euro) Diluted earnings/(loss) per share from continuing operations attributable to shareholders of the Parent Company (euro) 8.a 8.b [Subtotal] 9.a 9.b 9.c 9.d 9.e 9.f 9.g [Subtotal] 10 11 12 11 12 13 14 77,366 2,961 80,327 33,755 18,580 4,634 1,144 9,682 7,276 (2,355) 72,716 (733) 6,878 1,484 1,637 1,142 4,518 95 (122) 4,312 836 3,476 - 3,476 2,174 1,302 0.21 0.21 0.21 0.21 4,804 73,037 16 2,538 75,575 7,189 2,617 235 11 88 46 37,264 18,406 4,581 1,096 5,355 1,769 (2,264) 66,207 532 9,900 1,993 1,715 1,532 4,392 168 349 8,201 1,851 6,350 - 6,350 4,789 1,561 0.47 0.47 0.47 0.47 (1) The 2018 figures have been represented to take account of the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) con- tained in the Agenda Decision of March 2019, which involved changes in the classification, with no impact on margins, of the effects of purchase and sales contracts for commodities measured at fair value through profit or loss (for more details, see note 4.3 of the consolidated financial statements). 166 Consolidated Annual Report 2019Statement of Consolidated Comprehensive Income Millions of euro Notes Net income for the period Other comprehensive income recyclable to profit or loss (net of taxes) Effective portion of change in fair value of cash flow hedges Change in fair value of hedging costs Share of the other comprehensive income of equity investments accounted for using the equity method Change in fair value of financial assets at FVOCI Change in translation reserve Other comprehensive income not recyclable to profit or loss (net of taxes) Remeasurement of net liabilities/(assets) for employee benefits Change in fair value of equity investments in other entities Total other comprehensive income/(loss) for the period 34 Total comprehensive income/(loss) for the period Attributable to: - shareholders of the Parent Company - non-controlling interests 2019 3,476 39 120 (57) 5 (481) (502) - (876) 2,600 1,745 855 2018 6,350 (552) 83 (57) (3) (1,287) (120) 12 (1,924) 4,426 3,667 759 167 Consolidated financial statementsEnel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsConsolidated Balance Sheet at Dec. 31, 2019 at Dec. 31, 2018 of which with related parties of which with related parties Notes 16 19 20 21 22 23 24 25 26 27 79,809 112 19,089 14,241 9,112 1,682 1,383 487 6,006 2,701 [Total] 134,622 28 29 25 24 30 31 32 [Total] 33 2,531 13,083 166 409 4,065 4,305 3,115 9,029 36,703 101 171,426 76,631 135 19,014 14,273 8,305 2,099 1,005 346 5,769 1,272 128,849 2,818 13,587 135 660 3,914 5,160 2,983 6,630 35,887 688 165,424 15 896 8 27 183 1,085 52 21 165 Millions of euro ASSETS Non-current assets Property, plant and equipment Investment property Intangible assets Goodwill Deferred tax assets Equity investments accounted for using the equity method Derivatives Non-current contract assets Other non-current financial assets Other non-current assets Current assets Inventories Trade receivables Current contract assets Tax receivables Derivatives Other current financial assets Other current assets Cash and cash equivalents Assets classified as held for sale TOTAL ASSETS 168 Consolidated Annual Report 2019 Millions of euro Notes LIABILITIES AND SHAREHOLDERS’ EQUITY at Dec. 31, 2019 at Dec. 31, 2018 of which with related parties of which with related parties Equity attributable to shareholders of the Parent Company Share capital Treasury share reserve Other reserves Retained earnings/ (loss carried forward) Non-controlling interests Total shareholders’ equity Non-current liabilities Long-term borrowings Employee benefits Provisions for risks and charges (non-current portion) Deferred tax liabilities Derivatives Non-current contract liabilities Other non-current liabilities Current liabilities Short-term borrowings Current portion of long-term borrowings Provisions for risks and charges (current portion) Trade payables Income tax payable Derivatives Current contract liabilities Other current financial liabilities Other current liabilities Liabilities included in disposal groups classified as held for sale Total liabilities TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 10,167 (1) 1,130 19,081 30,377 16,561 46,938 54,174 3,771 5,324 8,314 2,407 6,301 3,706 [Total] 34 35 36 37 22 24 25 38 [Total] 83,997 35 35 37 39 24 25 40 42 [Total] 33 3,917 3,409 1,196 12,960 209 3,554 1,328 754 13,161 40,488 3 124,488 171,426 10,167 - 1,700 19,853 31,720 16,132 47,852 715 48,983 804 151 89 2,291 8 39 30 3,187 5,181 8,650 2,609 6,306 1,901 76,817 3,616 3,367 1,312 13,387 333 4,343 1,095 788 12,107 40,348 407 117,572 165,424 86 89 2,924 35 25 69 169 Consolidated financial statementsEnel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statements Statement of Changes in Consolidated Shareholders’ Equity (note 34) Share capital and reserves attributable to shareholders of the Parent Company Share capital Share premium reserve Treasury share reserve Legal reserve Other reserves Reserve from translation of financial statements in currencies other than euro Reserve from measurement of cash flow hedge financial instruments Reserve from from equity Reserve from Reserve Equity measurement Reserve from investments remeasurement Reserve from from Retained attributable of costs of measurement accounted of net liabilities/ disposal of acquisitions earnings to Reserve hedging of financial for using (assets) of equity interests of non- and loss shareholders Non- Total financial instruments at the equity defined benefit without loss of controlling carried of the Parent controlling shareholders’ instruments FVOCI method control interests forward Company interests At December 31, 2017 10,167 7,489 Application of new accounting standards (IFRS 9 and IFRS 15) Monetary revaluation (IAS 29) - - - - At January 1, 2018 restated 10,167 7,489 Distribution of dividends and interim dividends Monetary revaluation (IAS 29) Transactions in non-controlling interests Change in the scope of consolidation Comprehensive income for the period of which: - other comprehensive income/(loss) - net income/(loss) for the period - - - - - - - - - - - - - - At December 31, 2018 10,167 7,489 Distribution of dividends Purchase of treasury shares Reclassifications Monetary revaluation (IAS 29) Transactions in non-controlling interests Change in the scope of consolidation Comprehensive income for the period of which: - other comprehensive income/(loss) - net income/(loss) for the period - - - - - - - - - - (9) 7 - - - - - - - - - - - - - - - - - - (1) - - - - - - - 2,034 2,262 (2,614) (1,588) (5) (2,398) (1,163) 21,280 34,795 17,366 - - - - - - 348 - 2,034 2,262 (2,614) (1,240) (348) (20) (5) (646) (2,398) (1,163) 17,785 31,303 17,152 - - - - - - - - - - - - - - - - - (94) (609) (609) - - - - (14) (491) (491) - 2,034 2,262 (3,317) (1,745) (258) 16 (63) (714) (2,381) (1,623) 19,853 - - - - - - - - - - - - - - - - - - - - - - - (220) (265) (265) - - - - - - 41 94 94 - At December 31, 2019 10,167 7,487 (1) 2,034 2,262 (3,802) (1,610) (147) 21 (119) (1,043) (2,381) (1,572) 19,081 30,377 16,561 46,938 (348) (23) 3 - - - - - - - - - - - - - - 90 90 111 111 - - - - - - - - - - - - - - (58) (58) (56) (56) 27 9 9 - - - - - - - - - - - 5 5 - plans (646) - - - - - - - - - - - - (5) (63) (63) (11) (318) (318) (3,707) (3,704) (576) (4,280) 212 212 362 (2,765) (2,765) (1,137) (3,902) 73 73 143 216 17 (460) (850) (1,293) (443) (115) (29) 4,789 3,667 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (7) 61 (3) - - - - - - - 4,789 (3,050) 104 2,174 2,174 65 759 (802) 1,561 16,132 (1,190) - - 170 593 1 855 (447) 1,302 (1,122) 4,789 31,720 (3,050) (10) - 104 61 (193) 1,745 (429) 2,174 equity 52,161 574 48,455 (50) 4,426 (1,924) 6,350 47,852 (4,240) (10) - 274 654 (192) 2,600 (876) 3,476 170 Consolidated Annual Report 2019Share capital and reserves attributable to shareholders of the Parent Company Share capital reserve share reserve Legal reserve reserves euro instruments Treasury Other other than hedge financial Share premium At December 31, 2017 10,167 7,489 2,034 2,262 (2,614) (1,588) Reserve from translation of financial Reserve from statements measurement in currencies of cash flow Reserve from measurement of costs of hedging financial instruments Reserve from measurement of financial instruments at FVOCI - (23) (348) - (348) - - - - 90 90 - At December 31, 2018 10,167 7,489 2,034 2,262 (3,317) (1,745) (258) - - - - - - 111 111 - (147) 3 - (20) - - - 27 9 9 - 16 - - - - - - 5 5 - 21 At January 1, 2018 restated 10,167 7,489 2,034 2,262 (2,614) (1,240) Application of new accounting standards (IFRS 9 and IFRS 15) Monetary revaluation (IAS 29) Distribution of dividends and interim dividends Monetary revaluation (IAS 29) Transactions in non-controlling interests Change in the scope of consolidation Comprehensive income for the period of which: - other comprehensive income/(loss) - net income/(loss) for the period Distribution of dividends Purchase of treasury shares Reclassifications Monetary revaluation (IAS 29) Transactions in non-controlling interests Change in the scope of consolidation Comprehensive income for the period of which: - other comprehensive income/(loss) - net income/(loss) for the period - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (9) 7 (1) - - - - - - - - - - - - - - - - - - - (94) (609) (14) (491) (609) (491) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (220) (265) (265) 348 - - - - - - - - - - 41 94 94 - At December 31, 2019 10,167 7,487 (1) 2,034 2,262 (3,802) (1,610) (5) - - (5) - - - - (58) (58) - (63) - - - - - - (56) (56) - (119) Reserve from equity investments accounted for using the equity method Reserve from remeasurement of net liabilities/ (assets) of defined benefit plans Reserve from disposal of equity interests without loss of control Reserve from acquisitions of non- controlling interests Retained earnings and loss carried forward Equity attributable to shareholders of the Parent Company Non- controlling interests Total shareholders’ equity (646) (2,398) (1,163) 21,280 34,795 17,366 52,161 - - - - - - (646) (2,398) (1,163) 17,785 31,303 17,152 212 212 362 574 48,455 (3,707) (3,704) (576) (4,280) (2,765) (2,765) (1,137) (3,902) 73 143 216 - - - (5) (63) (63) - (714) - - - - - (11) (318) (318) - - - - - 17 (460) - - - - - - - - 73 - (29) - 4,789 (2,381) (1,623) 19,853 - - - - - - - - - (3,050) - - 104 - - 2,174 - 2,174 - (7) 61 (3) - - - 4,789 3,667 (443) (115) (1,122) 4,789 31,720 (3,050) (10) - 104 61 (193) 1,745 (429) 2,174 (850) (1,293) 65 759 (802) 1,561 16,132 (1,190) - - 170 593 1 855 (447) 1,302 (50) 4,426 (1,924) 6,350 47,852 (4,240) (10) - 274 654 (192) 2,600 (876) 3,476 (1,043) (2,381) (1,572) 19,081 30,377 16,561 46,938 171 Consolidated financial statementsEnel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsConsolidated Statement of Cash Flows Millions of euro Notes 2019 2018 of which with related parties of which with related parties Income before taxes for the period Adjustments for: Net impairment/(reversals) of trade receivables and other receivables Depreciation, amortization and other impairment losses Financial (income)/expense Net income of equity investments accounted for using the equity method Changes in net working capital: - inventories - trade receivables - trade payables - other contract assets (1) - other contract liabilities (1) - other assets/(liabilities) Accruals to provisions Utilization of provisions Interest income and other financial income collected Interest expense and other financial expense paid Net (income)/expense from measurement of commodities Income taxes paid Capital (gains)/losses Cash flows from operating activities (A) Investments in property, plant and equipment Investments in intangible assets Investments in non-current contract assets Investments in entities (or business units) less cash and cash equivalents acquired Disposal of entities (or business units) less cash and cash equivalents sold (Increase)/Decrease in other investing activities Cash flows from investing/disinvesting activities (B) Financial debt (new long-term borrowing) Repayments of financial debt (1) Other changes in net financial debt (1) Receipts from disposal of equity investments without loss of control (1) Payments for acquisitions of equity investments without change of control and other transactions with non-controlling interests (1) Purchase of own shares Dividends and interim dividends paid Cash flows from financing activities (C) Impact of exchange rate fluctuations on cash and cash equivalents (D) Increase/(Decrease) in cash and cash equivalents (A+B+C+D) Cash and cash equivalents at the beginning of the period (2) Cash and cash equivalents at the end of the period (3) 9.d 9.e 11-12 13 28 29 39 25 25 11-12 11-12 14 16 20 6 6 43.3 43.3 4,312 1,144 9,682 2,443 123 (273) 318 (877) (51) (31) 154 214 515 (1,838) 1,582 (4,235) (86) (1,850) (268) 11,251 (8,236) (1,023) (692) (320) 688 468 (9,115) 8,899 (5,511) 355 - 530 (10) (3,957) 306 (76) 2,366 6,714 9,080 189 (633) 18 88 (46) (89) 8,201 1,096 5,355 2,048 (349) 153 (117) 426 734 - 750 (1,640) 449 (1,226) 1,768 (4,342) (71) (1,721) (286) 11,075 (6,908) (1,351) (271) (1,472) 424 (83) (9,661) 13,424 (12,040) 1,826 2 (1,404) - (3,444) (1,636) (185) (407) 7,121 6,714 (253) 559 71 59 (55) (89) (1) In order to improve the presentation of these items, they have been broken down to a greater extent than in the past, making it necessary to reclassify the figures for 2018 in order to ensure the uniformity and comparability of the data with the previous year. (2) Of which cash and cash equivalents equal to €6,630 million at January 1, 2019 (€7,021 million at January 1, 2018), short-term securities equal to €63 million at January 1, 2019 (€69 million at January 1, 2018) and cash and cash equivalents pertaining to “Assets held for sale” in the amount of €21 million at January 1, 2019 (€31 million at January 1, 2018). (3) Of which cash and cash equivalents equal to €9,029 million at December 31, 2019 (€6,630 million at December 31, 2018), short-term securities equal to €51 million at December 31, 2019 (€63 million at December 31, 2018) and cash and cash equivalents pertaining to “Assets held for sale” in the amount of €21 million at December 31, 2018. 172 Consolidated Annual Report 2019Notes to the financial statements 1. Form and content of the financial statements Enel SpA has its registered office in Viale Regina Margherita The assets and liabilities reported in the consolidated balance 137, Rome, Italy, and since 1999 has been listed on the Milan sheet are classified on a “current/non-current” basis with sep- stock exchange. Enel is an energy multinational and is one arate reporting of assets held for sale and liabilities included of the world’s leading integrated operators in the electricity in disposal groups held for sale. Current assets, which include and gas industries, with a special focus on Europe and South cash and cash equivalents, are assets that are intended to be America. realized, sold or consumed during the normal operating cycle The consolidated financial statements for the period ended of the Group or in the 12 months following the balance-sheet December 31, 2019 comprise the financial statements of date; current liabilities are liabilities that are expected to be Enel SpA, its subsidiaries and Group holdings in associates settled during the normal operating cycle of the Group or and joint ventures, as well as the Group’s share of the assets, within the 12 months following the close of the financial year. liabilities, costs and revenue of joint operations (“the Group”). The consolidated income statement is classified on the basis A list of the subsidiaries, associates, joint operations and joint of the nature of costs, with separate reporting of net income/ ventures included in the scope of consolidation is attached. (loss) from continuing operations and net income/(loss) from The consolidated financial statements were approved for pub- Parent Company and to non-controlling interests. lication by the Board on March 19, 2020. The indirect method is used for the consolidated statement These financial statements have been audited by EY SpA. of cash flows, with separate reporting of any cash flows by discontinued operations attributable to shareholders of the Basis of presentation operating, investing and financing activities associated with discontinued operations. In particular, although the Group does not diverge from the The consolidated financial statements for the year ended De- provisions of IAS 7 in the classification of items: cember 31, 2019 have been prepared in accordance with the > cash flows from operating activities report cash flows from international accounting standards (International Accounting core operations, interest on loans granted and obtained Standards - IAS and International Financial Reporting Stand- and dividends received from joint ventures or associates; ards - IFRS) issued by the International Accounting Standards > investing/disinvesting activities comprise investments in Board (IASB), the interpretations of the IFRS Interpretations property, plant and equipment and intangible assets and dis- Committee (IFRSIC) and the Standing Interpretations Com- posals of such assets and contract assets related to service mittee (SIC), recognized in the European Union pursuant to concession arrangements. They include, also, the effects of Regulation 2002/1606/EC and in effect as of the close of the business combinations in which the Group acquires or loses year. All of these standards and interpretations are hereinafter control of companies, as well as other minor investments; referred to as the “IFRS-EU”. > cash flows from financing activities include cash flows The financial statements have also been prepared in conform- generated by liability management transactions, dividends ity with measures issued in implementation of Article 9, para- paid to non-controlling interests by the Parent Company graph 3, of Legislative Decree 38 of February 28, 2005. or other consolidated companies and the effects of trans- The consolidated financial statements consist of the consoli- actions in non-controlling interests that do not change the dated income statement, the statement of consolidated com- status of control of the companies involved; prehensive income, the consolidated balance sheet, the state- > a separate item is used to report the impact of exchange ment of changes in consolidated shareholders’ equity and the rates on cash and cash equivalents and their impact on consolidated statement of cash flows and the related notes. profit or loss is eliminated in full in order to neutralize the 173 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementseffect on cash flows from operating activities. classified as held for sale, which are measured at the lower of For more information on cash flows as reported in the state- their carrying amount and fair value less costs to sell. ment of cash flows, please see the note on “cash flows” in The consolidated financial statements are presented in euro, the Report on Operations. the functional currency of the Parent Company Enel SpA. All The income statement, the balance sheet and the statement figures are shown in millions of euro unless stated otherwise. of cash flows report transactions with related parties, the The consolidated income statement, the consolidated bal- definition of which is given in the next section below. ance sheet and the consolidated statement of cash flows re- The consolidated financial statements have been prepared port transactions with related parties, the definition of which on a going concern basis using the cost method, with the is given in the paragraph “Accounting policies and measure- exception of items measured at fair value in accordance with ment criteria”. IFRS, as explained in the measurement bases applied to each The consolidated financial statements provide comparative individual item, and of non-current assets and disposal groups information in respect of the previous period. 2. Accounting policies and measurement criteria 2.1 Use of estimates and management judgment Preparing the consolidated financial statements under IF- Use of estimates Revenue from contracts with customers Revenue from supply of electricity and gas to end-users is RS-EU requires management to take decisions and make recognized at the time the electricity or gas is delivered and estimates and assumptions that may impact the value of rev- includes, in addition to amounts invoiced on the basis of peri- enue, costs, assets and liabilities and the related disclosures odic (and pertaining to the year) meter readings or on the vol- concerning the items involved as well as contingent assets umes notified by distributors and transporters, an estimate of and liabilities at the balance-sheet date. The estimates and the electricity and gas delivered during the period but not yet management’s judgments are based on previous experience invoiced that is equal to the difference between the amount and other factors considered reasonable in the circumstanc- of electricity and gas delivered to the distribution network es. They are formulated when the carrying amount of assets and that invoiced in the period, taking account of any network and liabilities is not easily determined from other sources. The losses. Revenue between the date of the last meter reading actual results may therefore differ from these estimates. The and the year-end is based on estimates of the daily consump- estimates and assumptions are periodically revised and the tion of individual customers, primarily determined on their effects of any changes are reflected through profit or loss if historical information, adjusted to reflect the climate factors they only involve that period. If the revision involves both the or other matters that may affect the estimated consumption. current and future periods, the change is recognized in the For more details on this item of revenue, see note 8.a “Reve- period in which the revision is made and in the related future nue from sales and services”. periods. In order to enhance understanding of the financial statements, the following sections examine the main items affected by Impairment of non-financial assets When the carrying amount of property, plant and equipment, the use of estimates and the cases that reflect management investment property, intangible assets, right-of-use assets judgments to a significant degree, underscoring the main as- and goodwill exceeds its recoverable amount, which is the sumptions used by management in measuring these items in higher of the fair value less costs of disposal and the value in compliance with the IFRS-EU. The critical element of such val- use, the assets are impaired. uations is the use of assumptions and professional judgments Such assessments of the recoverable amount of assets are concerning issues that are by their very nature uncertain. carried out in accordance with the provisions of IAS 36, as Changes in the conditions underlying the assumptions and described in greater detail in note 21 below. judgments could have a substantial impact on future results. In order to determine the recoverable amount, the Group gen- 174 Consolidated Annual Report 2019erally adopts the value in use criterion. Value in use is based Based on the specific reference market and the regulatory on the estimated future cash flows generated by the asset in context of the sector, as well as expectations of recovery after exam, discounted to their present value using a pre-tax dis- 90 days, for such receivables, the Enel Group mainly applies a count rate that reflects the current market assessment of the default definition of 180 days past due to determine expected time value of money and of the specific risks of the asset. credit losses, as this is considered an effective indication of a Future cash flows used to determine value in use are based significant increase in credit risk. Accordingly, financial assets on the most recent business plan, approved by the manage- that are more than 90 days past due are generally not con- ment, containing forecasts for volumes, revenue, operating sidered to be in default, except for some specific regulated costs and investments. markets. These projections cover the next five years. Consequently, For trade receivables and contract assets the Group mainly cash flows related to subsequent periods are determined applies a collective approach based on grouping the receiv- based on a long-term growth rate that does not exceed the ables into specific clusters, taking into account the specific average long-term growth rate for the particular sector and regulatory and business context. Only if the trade receivables country. are deemed to be individually significant by management and The recoverable amount is sensitive to the estimates and there are specific information about any significant increase in assumptions used in the calculation of cash flows and the credit risk, the Group applies an analytical approach. discount rates applied. Nevertheless, possible changes in the In case of individual assessment, PD is mainly obtained from estimation factors on which the calculation of such values is an external provider. performed could generate different recoverable values. The Conversely, for collective assessment, trade receivables are analysis of each group of non-financial assets is unique and grouped based on shared credit risk characteristics and past requires management to use estimates and assumptions due information, considering a specific definition of default. considered prudent and reasonable in the specific circum- stances. Expected credit losses on financial assets At the end of each reporting date, the Group recognizes a Based on each business and local regulatory framework as well as differences in client portfolios also in terms of risk, default rates and recovery expectations, specific clusters are defined. loss allowance for expected credit losses on trade receivables The contract assets are considered to have substantially the and other financial assets measured at amortized cost, debt same risk characteristics as the trade receivables for the instruments measured at fair value through other comprehen- same types of contracts. sive income, contract assets and all other assets in the scope. Loss allowances for financial assets are based on assump- In order to measure the ECL for trade receivables on a collec- tions about risk of default and on the measurement of expect- tive basis, as well as for contract assets, the Group considers ed credit losses. Management uses judgement in making the following assumptions related to ECL parameters: these assumptions and selecting the inputs for the impair- > PD, assumed as to be the average default rate, is calcu- ment calculation, based on the Group’s past history, existing lated on a cluster basis and taking into consideration mini- market conditions as well as forward looking estimates at the mum 24 month historical data; end of each reporting period. > LGD is function of the default bucket’s recovery rates, dis- The expected credit loss (ECL), determined considering prob- counted at the EIR; and ability of default (PD), loss given default (LGD), and exposure > EAD is estimated as the carrying exposure at the reporting at default (EAD), is the difference between all contractual date net of cash deposits, including invoices issued but not cash flows that are due in accordance with the contract and expired and invoices to be issued. all cash flows that are expected to be received (i.e., all short- Based on specific management evaluations, the forward-look- falls) discounted at the original effective interest rate (EIR). ing adjustment can be applied considering qualitative and In particular, for trade receivables, contract assets and lease quantitative information in order to reflect possible future receivables, including those with a significant financial com- events and macroeconomic scenarios, which may affect the ponent, the Group applies the simplified approach, determin- risk of the portfolio or the financial instrument. ing expected credit losses over a period corresponding to the For additional details on the key assumptions and inputs used, entire life of the receivable, generally equal to 12 months. please refer to note 43 “Financial instruments”. 175 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsDepreciable value of certain elements of Italian hydroelectric plants subsequent to enactment of Law 134/2012 Law 134 of August 7, 2012 containing “urgent measures for growth” (published in the Gazzetta Ufficiale of August 11, 2012) introduced a sweeping overhaul of the rules governing hydroelectric concessions. Among its various provisions, the law establishes that five years before the expiration of a ma- jor hydroelectric water diversion concession and in cases of lapse, relinquishment or revocation, where there is no pre- vailing public interest for a different use of the water, incom- patible with its use for hydroelectric generation, the compe- tent public entity shall organize a public call for tender for the award for consideration of the concession for a period ranging from 20 to a maximum of 30 years. In order to ensure operational continuity, the law also gov- erns the methods of transfer ownership of the business unit necessary to operate the concession, including all legal rela- tionships relating to the concession, from the outgoing con- cession holder to the new concession holder, in exchange for payment of a price to be determined in negotiations between the departing concession holder and the grantor agency, tak- ing due account of the following elements: > for intake and governing works, penstocks and outflow chan- nels, which under the consolidated law governing waters and electrical plants are to be relinquished free of charge (Article 25 of Royal Decree 1775 of December 11, 1933), the revalued cost less government capital grants, also revalued, received by the concession holder for the construction of such works, depreciated for ordinary wear and tear; > for other property, plant and equipment, the market value, meaning replacement value, reduced by estimated depre- ciation for ordinary wear and tear. While acknowledging that the new regulations introduce im- portant changes as to the transfer of ownership of the busi- ness unit with regard to the operation of the hydroelectric concession, the practical application of these principles faces difficulties, given the uncertainties that do not permit the for- mulation of a reliable estimate of the value that can be recov- ered at the end of existing concessions (residual value). Accordingly, management has decided it could not produce a reasonable and reliable estimate of residual value. The fact that the legislation requires the new concession holder to make a payment to the departing concession holder prompted management to review the depreciation schedules for assets classified as to be relinquished free of charge prior to Law 134/2012 (until the year ended on December 31, 2011, given that the assets were to be relinquished free of charge, the depreciation period was equal to the closest date be- tween the term of the concession and the end of the useful life of the individual asset), calculating depreciation no longer over the term of the concession but, if longer, over the eco- nomic and technical life of the individual assets. If additional information becomes available to enable the calculation of re- sidual value, the carrying amounts of the assets involved will be adjusted prospectively. Determining the fair value of financial instruments The fair value of financial instruments is determined on the basis of prices directly observable in the market, where available, or, for unlisted financial instruments, using specif- ic valuation techniques (mainly based on present value) that maximize the use of observable market inputs. In rare circum- stances were this is not possible, the inputs are estimated by management taking due account of the characteristics of the instruments being measured. In accordance with IFRS 13, the Group includes a measure- ment of credit risk, both of the counterparty (Credit Valuation Adjustment or CVA) and its own (Debit Valuation Adjustment or DVA), in order to adjust the fair value of financial instru- ments for the corresponding amount of counterparty risk, us- ing the method discussed in note 47. Changes in the assump- tions made in estimating the input date could have an impact on the fair value recognized for those instruments. Development costs In order to determine the recoverability of development costs, the recoverable amount is estimated making assump- tions regarding any further cash outflow that is expected to be incurred before the asset is ready for use or sale, the dis- count rates to be applied and the expected period of benefits. Pensions and other post-employment benefits Some of the Group’s employees participate in pension plans offering benefits based on their wage history and years of service. Certain employees are also eligible for other post-em- ployment benefit schemes. The expenses and liabilities of such plans are calculated on the basis of estimates carried out by consulting actuaries, who use a combination of statistical and actuarial elements in their calculations, including statistical data on past years and forecasts of future costs. Other components of the esti- mation that are considered include mortality and withdrawal rates as well as assumptions concerning future developments in discount rates, the rate of wage increases, the inflation rate and trends in healthcare cost. 176 Consolidated Annual Report 2019These estimates can differ significantly from actual develop- nomic parameters of the country in which the plant is located. ments owing to changes in economic and market conditions, That liability is quantified by management on the basis of increases or decreases in withdrawal rates and the lifespan of the technology existing at the measurement date and is re- participants, as well as changes in the effective cost of health- viewed each year, taking account of developments in storage, care. decommissioning and site restoration technology, as well as Such differences can have a substantial impact on the quanti- the ongoing evolution of the legislative framework governing fication of pension costs and other related expenses. health and environmental protection. For more details on the main actuarial assumptions adopted, Subsequently, the value of the obligation is adjusted to reflect please see note 36. the passage of time and any changes in estimates. Litigation The Enel Group is involved in various civil, administrative and Leases When the interest rate implicit in the lease cannot be readily tax disputes connected with the normal pursuit of its activi- determined, the Group uses the incremental borrowing rate ties that could give rise to significant liabilities. It is not always (IBR) at the lease commencement date to calculate the pres- objectively possible to predict the outcome of these disputes. ent value of the lease payments. This is the interest rate that The assessment of the risks associated with this litigation is the lessee would have to pay to borrow over a similar term, based on complex factors whose very nature requires re- and with a similar security, the funds necessary to obtain an course to management judgments, even when taking ac- asset of a similar value to the right of use asset in a sim- count of the contribution of external advisors assisting the ilar economic environment. When no observable inputs are Group, about whether to classify them as contingent liabilities available, the Group estimates the IBR making assumptions or liabilities. to reflect the terms and conditions of the lease and certain Provisions have been recognized to cover all significant lia- entity-specific estimates. bilities for cases in which legal counsel feels an adverse out- One of the most significant judgements for the Group in adopt- come is likely and a reasonable estimate of the amount of the ing IFRS 16 is determining this IBR necessary to calculate the loss can be made. Note 52 provides information on the most present value of the lease payments required to be paid to the significant contingent liabilities of the Group. lessor. The Group’s approach to determine an IBR is based on Obligations associated with generation plants, including decommissioning and site restoration Generation activities may entail obligations for the operator the assessment of the following three key components: > the risk free rate, that consider the currency flows of the lease payments, the economic environment where the lease contract has been negotiated and also the lease term; with regard to future interventions that will have to be per- > the credit spread adjustment, in order to calculate an IBR formed following the end of the operating life of the plant. that is specific for the lessee considering any Parent Com- Such interventions may involve the decommissioning of pany or other guarantee underlying; plants and site restoration, or other obligations linked to the > the lease related adjustments, in order to reflect into the type of generation technology involved. The nature of such IBR calculation the fact that the discount rate is directly obligations may also have a major impact on the accounting linked to the type of the underlying asset, rather than being treatment used for them. a general incremental borrowing rate. In particular, the risk In the case of nuclear power plants, where the costs regard of default is mitigated for the lessors as they have the right both decommissioning and the storage of waste fuel and oth- to reclaim the underlying asset itself. er radioactive materials, the estimation of the future cost is a critical process, given that the costs will be incurred over a Income tax very long span of time, estimated at up to 100 years. The obligation, based on financial and engineering assump- Recovery of deferred tax assets tions, is calculated by discounting the expected future cash At December 31, 2019, the consolidated financial statements flows that the Group considers it will have to pay to meet the report deferred tax assets in respect of tax losses to be re- obligations it has assumed. versed in subsequent years and income components whose The discount rate used to determine the present value of the deductibility is deferred in an amount whose recovery is con- liability is the pre-tax risk-free rate and is based on the eco- sidered by management to be highly probable. 177 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsThe recoverability of such assets is subject to the achieve- ment of future profits sufficient to absorb such tax losses and Determination of the existence of control Under the provisions of IFRS 10, control is achieved when to use the benefits of the other deferred tax assets. the Group is exposed, or has rights, to variable returns from Significant management judgement is required to assess the its involvement with the investee and has the ability to affect probability of recovering deferred tax assets, considering all those returns through its power over the investee. Power is negative and positive evidence, and to determine the amount defined as the current ability to direct the relevant activities of that can be recognized, based upon the likely timing and the the investee based on existing substantive rights. level of future taxable profits together with future tax planning The existence of control does not depend solely on ownership strategies and the tax rates applicable at the date of reversal. of a majority shareholding, but rather it arises from substan- However, where the Group should become aware that it is un- tive rights that each investor holds over the investee. Con- able to recover all or part of recognized tax assets in future sequently, management must use its judgment in assessing years, the consequent adjustment would be taken to the in- whether specific situations determine substantive rights that come statement in the year in which this circumstance arises. give the Group the power to direct the relevant activities of For more detail in deferred tax assets recognized or not rec- the investee in order to affect its returns. ognized, please see note 22. Management judgments Identification of cash generating units (CGUs) For impairment testing, if the recoverable amount cannot be For the purpose of assessing control, management analyses all facts and circumstances, including any agreements with other investors, rights arising from other contractual arrange- ments and potential voting rights (call options, warrants, put options granted to non-controlling shareholders, etc.). These other facts and circumstances could be especially significant determined for an individual asset, the Group identifies the in such assessment when the Group holds less than a majori- lowest aggregation of assets that generate largely independ- ty of voting rights, or similar rights, in the investee. ent cash inflows. The smallest group of assets that generates Following such analysis of the existence of control, in appli- cash inflows that are largely independent of the cash inflows cation of IFRS 10 the Group consolidated certain companies from other assets or group of assets is a CGU. (Emgesa and Codensa) on a line-by-line basis even though it Identifying such CGUs involves management judgments regard- did not hold more than half of the voting rights, determining ing the specific nature of the assets and the business involved that the requirements for de facto control existed. (geographical area, business area, regulatory framework, etc.) The Group re-assesses whether or not it controls an investee and the evidence that the cash inflows of the group of assets if facts and circumstances indicate that there are changes to are closely interdependent among them and largely independ- one or more of the elements considered in verifying the ex- ent of those associated with other assets (or groups of assets). istence of control. The assets of each CGU are also identified on the basis of the manner in which management manages and monitors those assets within the business model adopted. The number and scope of the CGUs are updated systemati- Determination of the existence of joint control and of the type of joint arrangement Under the provisions of IFRS 11, a joint arrangement is an cally to reflect the impact of new business combinations and agreement where two or more parties have joint control. reorganizations carried out by the Group, and to take account Joint control exists when the decisions over the relevant ac- of external factors that could influence the ability of assets to tivities require the unanimous consent of at least two parties generate independent cash inflows. of a joint arrangement. In particular, if certain specific identified assets owned by A joint arrangement can be configured as a joint venture or a the Group are impacted by adverse economic or operating joint operation. Joint ventures are joint arrangements where- conditions that undermine their capacity to contribute to the by the parties that have joint control have rights to the net generation of cash flows, they can be isolated from the rest assets of the arrangement. Conversely, joint operations are of the assets of the CGU, undergo separate analysis of their joint arrangements whereby the parties that have joint control recoverability and be impaired where necessary. have rights to the assets and obligations for the liabilities re- The CGUs identified by management to which the goodwill lating to the arrangement. recognized in these consolidated financial statements has In order to determine the existence of the joint control and been allocated are indicated in note 21. the type of joint arrangement, management must apply judg- 178 Consolidated Annual Report 2019ment and assess its rights and obligations arising from the On the basis of that analysis, the provisions of IFRIC 12 are arrangement. For this purpose, the management considers applicable to some of the infrastructure of a number of com- the structure and legal form of the arrangement, the terms panies that operate in Brazil. agreed by the parties in the contractual arrangement and, Further details about the infrastructure used in the service when relevant, other facts and circumstances. concession arrangements in the scope of IFRIC 12 are pro- Following that analysis, the Group has considered its interest vided in note 17. in Asociación Nuclear Ascó-Vandellós II as a joint operation. The Group re-assesses whether or not it has joint control if facts and circumstances indicate that changes have occurred Revenue from contracts with customers In the process of applying IFRS 15, the Group has made the in one or more of the elements considered in verifying the ex- following judgments (further details about the most signifi- istence of joint control and the type of the joint arrangement. cant effect on the Group’s revenue are provided in the note 8.a “Revenue from sales and services”). Determination of the existence of significant influence over an associate Associated companies are those in which the Group exercis- Identification of the contract The Group carefully analyses the contractual terms and con- es significant influence, i.e. the power to participate in the ditions on a jurisdictional level in order to determine when a financial and operating policy decisions of the investee but contract exists and the terms of that contract’s enforceability not to exercise control or joint control over those policies. In so as to apply IFRS 15 only to such contracts. general, it is presumed that the Group has a significant influ- ence when it has an ownership interest of 20% or more. Identification and satisfaction of performance obligations In order to determine the existence of significant influence, When a contract includes multiple promised goods or servic- management must apply judgment and consider all facts and es, in order to assess if they should be accounted for sepa- circumstances. rately or as a group, the Group considers both the individual The Group re-assesses whether or not it has significant influ- characteristics of goods/services and the nature of the prom- ence if facts and circumstances indicate that there are chang- ise within the context of the contract, also evaluating all the es to one or more of the elements considered in verifying the facts and circumstances relating to the specific contract un- existence of significant influence. der the relevant legal and regulatory framework. Application of “IFRIC 12 - Service concession arrangements” to concessions “IFRIC 12 - Service concession arrangements” applies to “public-to-private” service concession arrangements, which To evaluate when a performance obligation is satisfied, the Group evaluates when the control of the goods or services is transferred to the customer, assessed primarily from the perspective of the customer. can be defined as contracts wherein the grantor conveys to Determination of the transaction price an operator the right to manage the infrastructure used to The Group considers all relevant facts and circumstances in provide services that give access to major public facilities for determining whether a contract includes variable considera- a certain period of time on behalf of the grantor. tion (i.e., consideration that may vary or depends upon the oc- More specifically, IFRIC 12 gives guidance on the account- currence or non-occurrence of a future event). In estimating ing by operators for “public-to-private” service concession variable consideration, the Group uses the method that better arrangements in the event that: predicts the consideration to which it will be entitled, apply- > the grantor controls or regulates what services the opera- ing it consistently throughout the contract and for similar con- tor must provide with the infrastructure, to whom it must tracts, also considering all available information, and updating provide them, and at what price; and such estimates until the uncertainly is resolved. The Group > the grantor controls – through ownership, beneficial entitle- includes the estimated variable consideration in the transac- ment or otherwise – any significant residual interest in the tion price only to the extent that it is high probable that a infrastructure at the end of the term of the arrangement. significant reversal in the cumulative revenue recognized will In assessing the applicability of these requirements for the not occur when the uncertainty is resolved. Group, as operator, management carefully analyzed existing concessions. 179 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsPrincipal versus agent assessment acteristics of the instrument, management performs the SPPI The Group considers that it is an agent in some contracts in test at an instrument level, in order to determine if it gives rise which it is not primarily responsible for fulfilling the contract to cash flows that are solely payments of principal and inter- and therefore it does not control goods or services before est (SPPI) on the principal amount outstanding, performing they are being transferred to customers. For example, the specific assessment on the contractual clauses of the finan- Group acts as an agent in some contracts for electricity/gas cial instruments, as well as quantitative analysis, if required. network connection services and other related activities de- The business model determines whether cash flows will re- pending on local legal and regulatory framework. sult from collecting contractual cash flows, selling the finan- cial assets, or both. Allocation of transaction price For more details, please see note 43 “Financial instruments”. For contracts that have more than one performance obligation (e.g., “bundled” sale contracts), the Group generally allocates the transaction price to each performance obligation in pro- Hedge accounting Hedge accounting is applied to derivatives in order to reflect portion to its stand-alone selling price. The Group determines into the financial statements the effect of risk management stand-alone selling prices considering all information and us- strategies. ing observable prices when they are available in the market Accordingly, at the inception of the transaction the Group doc- or, if not, using an estimation method that maximizes the use uments the hedge relationship between hedging instruments of observable inputs and applying it consistently to similar ar- and hedged items, as well as its risk management objectives rangements. and strategy. The Group also assesses, both at hedge incep- If the Group evaluates that a contract includes an option tion and on an ongoing basis, whether hedging instruments for additional goods or services (e.g., customer loyalty pro- are highly effective in offsetting changes in the fair values or grams or renewal options) that represents a material right, it cash flows of hedged items. allocates the transaction price to this option since the option On the basis of management’s judgement, the effectiveness gives rise to an additional performance obligation. assessment based on the existence of an economic rela- Contract costs tionship between the hedging instruments and the hedged items, the dominance of credit risk in the value changes and The Group assesses recoverability of the incremental costs the hedge ratio, as well as the measurement of the ineffec- of obtaining a contract either on a contract-by-contract basis, tiveness, is evaluated through a qualitative assessment or a or for a group of contracts if those costs are associated with quantitative computation, depending on the specific facts and the group of contracts. circumstances and on the characteristics of the hedged items The Group supports the recoverability of such costs on the ba- and the hedging instruments. sis of its experience with other similar transactions and eval- For cash flow hedges of forecast transactions designated as uating various factors, including potential renewals, amend- hedged items, management assesses and documents that ments and follow-on contracts with the same customer. they are highly probable and present an exposure to changes The Group amortizes such costs over the average customer in cash flows that affect profit or loss. term. In order to determine this expected period of benefit For additional details on the key assumptions about effective- from the contract, the Group considers its past experience ness assessment and ineffectiveness measurement, please (e.g., “churn rate”), the predictive evidence from similar con- refer to note 46.1 “Derivatives and hedge accounting”. tracts and available information about the market. Classification and measurement of financial assets At initial recognition, in order to classify financial assets as Leases The complexity of the assessment of the lease contracts, and also their long-term expiring date, requires considerable pro- financial assets at amortized cost, at fair value through oth- fessional judgments for application of IFRS 16. In particular, er comprehensive income and at fair value through profit or this regards: loss, management assesses both the contractual cash-flow > the application of the definition of a lease to the cases typ- characteristics of the instrument and the business model for ical of the sectors in which the Group operates; managing financial assets in order to generate cash flows. > the identification of the non-lease component into the For the purpose of evaluating the contractual cash-flow char- lease arrangements; 180 Consolidated Annual Report 2019 > the evaluation of any renewable and termination options in- returns deriving from its involvement and has the ability, through cluded into the lease arrangements in order to determine the the exercise of its power over the investee, to affect its returns. lease term of contracts, also considering the probability of The figures of the subsidiaries are consolidated on a full line- their exercise and any significant leasehold improvements on by-line basis as from the date control is acquired until such the underlying asset, taking due consideration of recent in- control ceases. terpretations issued by the IFRS Interpretations Committee; > the identification of any variable lease payments that depend on an index or a rate to determine whether the Consolidation procedures The financial statements of subsidiaries used to prepare the changes of the latter impact the future lease payments and consolidated financial statements were prepared at December also the amount of the right-of-use asset; 31, 2018 in accordance with the accounting policies adopted by > the estimate of the discount rate to calculate the present the Parent Company. value of the lease payments; further details on assump- If a subsidiary uses different accounting policies from those tions about this rate are provided in the paragraph “Use of adopted in preparing the consolidated financial statements for estimates”. Uncertainty over income tax treatments The Group determines whether to consider each uncertain in- similar transactions and facts in similar circumstances, appro- priate adjustments are made to ensure conformity with the Group’s accounting policies. Assets, liabilities, revenue and expenses of a subsidiary acquired come tax treatment separately or together with one or more or disposed of during the year are included in or excluded from other uncertain tax treatments as well as whether to reflect the consolidated financial statements, respectively, from the the effect of uncertainty by using the most likely amount or date the Group gains control or until the date the Group ceases the expected value method, based on which approach better to control the subsidiary. predicts the resolution of the uncertainty for each uncertain Profit or loss and the other components of other compre- tax treatments, taking account of local tax regulations. hensive income are attributed to the owners of the Parent 2.2 Significant accounting policies and non-controlling interests, even if this results in a loss for non-controlling interests. All intercompany assets and liabilities, equity, income, expenses and cash flows relating to transactions between entities of the Group are eliminated in full. Related parties Related parties are mainly parties that have the same controlling Changes in ownership interest in subsidiaries that do not result in loss of control are accounted for as equity transactions, with entity as Enel SpA, companies that directly or indirectly through the carrying amounts of the controlling and non-controlling in- one or more intermediaries control, are controlled or are sub- terests adjusted to reflect changes in their interests in the sub- ject to the joint control of Enel SpA and in which the latter has a sidiary. Any difference between the fair value of the considera- holding that enables it to exercise a significant influence. Related tion paid or received and the corresponding fraction of equity parties also include entities operating post-employment benefit acquired or sold is recognized in consolidated equity. plans for employees of Enel SpA or its associates (specifically, the When the Group ceases to have control over a subsidiary, any in- FOPEN and FONDENEL pension funds), as well as the members terest retained in the entity is remeasured to its fair value, recog- of the boards of statutory auditors, and their immediate family, nized through profit or loss, at the date when control is lost, rec- and the key management personnel, and their immediate fami- ognizing any gain or loss through profit or loss. In addition, any ly, of Enel SpA and its subsidiaries. Key management personnel amounts previously recognized in other comprehensive income comprises management personnel who have the power and di- in respect of the former subsidiary are accounted for as if the rect or indirect responsibility for the planning, management and Group had directly disposed of the related assets or liabilities. control of the activities of the Company. They include directors. Subsidiaries Subsidiaries are all entities over which the Group has control. The Investments in joint arrangements and associates A joint venture is an entity over which the Group exercises joint Group controls an entity, regardless of the nature of the formal re- control and has rights to the net assets of the arrangement. Joint lationship between them, when it is exposed/has rights to variable control is the sharing of control of an arrangement, whereby de- 181 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementscisions about the relevant activities require unanimous consent er comprehensive income in respect of the former associate or of the parties sharing control. joint venture are accounted for as if the Group had directly dis- An associate is an entity over which the Group has significant posed of the related assets or liabilities. influence. Significant influence is the power to participate in the If the Group’s ownership interest in an associate or a joint ven- financial and operating policy decisions of the investee without ture is reduced, but the Group continues to exercise a significant having control or joint control over the investee. influence or joint control, the Group continues to apply the equi- The Group’s investments in its joint ventures and associates are ty method and the share of the gain or loss that had previously accounted for using the equity method. been recognized in other comprehensive income relating to that Under the equity method, these investments are initially recog- reduction is accounted for as if the Group had directly disposed nized at cost and any goodwill arising from the difference be- of the related assets or liabilities. tween the cost of the investment and the Group’s share of the When a portion of an investment in an associate or joint venture net fair value of the investee’s identifiable assets and liabilities meets the criteria to be classified as held for sale, any retained at the acquisition date is included in the carrying amount of the portion of an investment in the associate or joint venture that investment. Goodwill is not individually tested for impairment. has not been classified as held for sale is accounted for using After the acquisition date, their carrying amount is adjusted to rec- the equity method until disposal of the portion classified as held ognize changes in the Group’s share of profit or loss of the asso- for sale takes place. ciate or joint venture. The other comprehensive income (OCI) of Joint operations are joint arrangements whereby the Group, such investees is presented as specific items of the Group’s OCI. which holds joint control, has rights to the assets and obligations Distributions received from joint ventures and associates reduce for the liabilities relating to the arrangement. For each joint oper- the carrying amount of the investments. ation, the Group recognized assets, liabilities, costs and revenue Profits and losses resulting from transactions between the on the basis of the provisions of the arrangement rather than the Group and the associates or joint ventures are eliminated to the participating interest held. extent of the interest in the associate or joint venture. The financial statements of the associates or joint ventures are prepared for the same reporting period as the Group. When nec- Translation of foreign currency items Transactions in currencies other than the functional currency essary, adjustments are made to bring the accounting policies in are recognized at the exchange rate prevailing on the date of line with those of the Group. the transaction. Monetary assets and liabilities denominated in After application of the equity method, the Group determines a foreign currency other than the functional currency are later whether it is necessary to recognize an impairment loss on its translated using the period-end exchange rate. investment in an associate or joint venture. If there is such ev- Non-monetary assets and liabilities denominated in foreign cur- idence, the Group calculates the amount of impairment as the rency that are recognized at historical cost are translated using difference between the recoverable amount of the associate or the exchange rate at the date of the transaction. Non-monetary joint venture and its carrying amount. assets and liabilities in foreign currency measured at fair value In the case of the Slovak Power Holding BV joint venture, any are translated using the exchange rate at the date that value impairment losses are assessed by determining the recoverable was determined. Any exchange rate differences are recognized value using the price formula specified in the agreement to sell through profit or loss. the 66% stake in Slovenské elektrárne by Enel Produzione to EP In determining the spot exchange rate to use on initial recog- Slovakia, which is based on various parameters, including the nition of the related asset, expense or income (or part of it) evolution of the net financial position of SE, developments in on the derecognition of a non-monetary asset or non-mone- energy prices in the Slovakian market, the operating efficiency tary liability relating to advance consideration, the date of the of SE as measured on the basis of benchmarks defined in the transaction is the date on which the Group initially recognizes contract and the enterprise value of Mochovce units 3 and 4. the non-monetary asset or non-monetary liability associated This value is compared against the carrying amount of the in- with the advance consideration. vestment, which is measured on the basis of the results of that If there are multiple advance payments or receipts, the Group formula at the closing date for the transaction of July 28, 2017. determines the transaction date for each payment or receipt of If the investment ceases to be an associate or a joint venture, advance consideration. the Group recognizes any retained investment at its fair value, through profit or loss. Any amounts previously recognized in oth- 182 Consolidated Annual Report 2019Translation of financial statements denominated in a foreign currency For the purposes of the consolidated financial statements, all profits/losses, assets and liabilities are stated in euro, which is the presentation currency of the Parent Company, Enel SpA. In order to prepare the consolidated financial statements, the financial statements of consolidated companies in functional currencies other than the presentation currency used in the consolidated financial statements are translated into euros by applying the relevant period-end exchange rate to the assets and liabilities, including goodwill and consolidation adjust- Business combinations carried out as from January 1, 2010 are recognized on the basis of IFRS 3 (2008), which is referred to as IFRS 3 (Revised) hereafter. More specifically, business combinations are recognized using the acquisition method, where the purchase cost (the consider- ation transferred) is equal to the fair value at the purchase date of the assets acquired and the liabilities incurred or assumed, as well as any equity instruments issued by the purchaser. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Costs directly attributable to the acquisition are recognized ments, and the average exchange rate for the period, which through profit or loss. approximates the exchange rates prevailing at the date of the The consideration transferred is allocated by recognizing the respective transactions, to the income statement items. Any resulting exchange rate gains or losses are recognized as a separate component of equity in a special reserve. The gains and losses are recognized proportionately in the income state- ment on the disposal (partial or total) of the subsidiary. Business combinations Business combinations initiated before January 1, 2010 and completed within that financial year are recognized on the basis of IFRS 3 (2004). Such business combinations were recognized using the pur- assets, liabilities and identifiable contingent liabilities of the ac- quired company at their fair values as at the acquisition date. Any positive difference between the price paid, measured at fair value as at the acquisition date, plus the value of any non-controlling interests, and the net value of the identifiable assets and liabilities of the acquiree measured at fair value is recognized as goodwill. If the difference is negative, the Group verifies whether it has correctly identified all the assets acquired and liabilities assumed and reviews the procedures used to determine the amounts to recognize at the acquisition date. If after this assessment the fair value of the net assets chase method, where the purchase cost is equal to the fair acquired still exceeds the total consideration transferred, this value at the date of the exchange of the assets acquired and excess represents the profit on a bargain purchase and is rec- the liabilities incurred or assumed, plus costs directly attribut- ognized through profit or loss. able to the acquisition. This cost was allocated by recognizing the assets, liabilities and identifiable contingent liabilities of the acquired company at their fair values. Any positive difference The value of non-controlling interests is determined either in proportion to the interest held by minority shareholders in the net identifiable assets of the acquiree or at their fair value as at between the cost of the acquisition and the fair value of the net the acquisition date. assets acquired pertaining to the shareholders of the Parent Company was recognized as goodwill. If the difference is neg- ative, the Group re-assesses whether it has correctly identified In the case of business combinations achieved in stages, at the date of acquisition of control the previously held equity interest in the acquiree is remeasured to fair value and any positive or all of the assets acquired and all of the liabilities assumed and negative difference is recognized in profit or loss. reviews the procedures used to measure the amounts to be recognized at the acquisition date. If the reassessment still re- sults in an excess of the fair value of net assets acquired over the aggregate consideration transferred, the resulting gain is a bargain purchase and is recognized through profit or loss. The value of non-controlling interests was determined in pro- portion to the interest held by minority shareholders in the net assets. In the case of business combinations achieved in stag- Any contingent consideration is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration classified as an asset or a liability, or as a financial instrument within the scope of IFRS 9, is recog- nized in profit or loss. If the contingent consideration is not within the scope of IFRS 9, it is measured in accordance with the appropriate IFRS-EU. Contingent consideration that is clas- sified as equity is not re-measured, and its subsequent settle- es, at the date of acquisition any adjustment to the fair value of ment is accounted for within equity. the net assets acquired previously was recognized in equity; the If the fair values of the assets, liabilities and contingent liabili- amount of goodwill was determined for each transaction sepa- rately based on the fair values of the acquiree’s net assets at the date of each exchange transaction. ties can only be calculated on a provisional basis, the business combination is recognized using such provisional values. Any adjustments resulting from the completion of the measure- 183 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsment process are recognized within 12 months of the date of acquisition, restating comparative figures. Fair value measurement For all fair value measurements and disclosures of fair value, Property, plant and equipment Property, plant and equipment is stated at cost, net of ac- cumulated depreciation and accumulated impairment losses, if any. Such cost includes expenses directly attributable to bringing the asset to the location and condition necessary for that are either required or permitted by international account- its intended use. ing standards, the Group applies IFRS 13. The cost is also increased by the present value of the es- Fair value is defined as the price that would be received to sell timate of the costs of decommissioning and restoring the an asset or paid to transfer a liability, in an orderly transaction, site on which the asset is located where there is a legal or between market participants, at the measurement date (i.e., constructive obligation to do so. The corresponding liability an exit price). is recognized under provisions for risks and charges. The ac- The fair value measurement assumes that the transaction to counting treatment of changes in the estimate of these costs, sell an asset or transfer a liability takes place in the principal the passage of time and the discount rate is discussed under market, i.e. the market with the greatest volume and level of “Provisions for risks and charges”. activity for the asset or liability. In the absence of a principal Property, plant and equipment transferred from customers to market, it is assumed that the transaction takes place in the connect them to the electricity distribution network and/or to most advantageous market to which the Group has access, i.e. provide them with other related services is initially recognized the market that maximizes the amount that would be received at its fair value at the date on which control is obtained. to sell the asset or minimizes the amount that would be paid Borrowing costs that are directly attributable to the acquisi- to transfer the liability. tion, construction or production of a qualifying asset, i.e. an The fair value of an asset or a liability is measured using the asset that takes a substantial period of time to get ready for assumptions that market participants would use when pricing its intended use or sale, are capitalized as part of the cost the asset or liability, assuming that market participants act of the assets themselves. Borrowing costs associated with in their economic best interest. Market participants are inde- the purchase/construction of assets that do not meet such pendent, knowledgeable sellers and buyers who are able to requirement are expensed in the period in which they are in- enter into a transaction for the asset or the liability and who curred. are motivated but not forced or otherwise compelled to do Certain assets that were revalued at the IFRS-EU transition so. date or in previous periods are recognized at their fair value, When measuring fair value, the Group takes into account the which is considered to be their deemed cost at the revalua- characteristics of the asset or liability, in particular: tion date. > for a non-financial asset, a fair value measurement takes Where individual items of major components of property, into account a market participant’s ability to generate eco- plant and equipment have different useful lives, the compo- nomic benefits by using the asset in its highest and best nents are recognized and depreciated separately. use or by selling it to another market participant that would Subsequent costs are recognized as an increase in the carry- use the asset in its highest and best use; ing amount of the asset when it is probable that future eco- > for liabilities and own equity instruments, the fair value re- nomic benefits associated with the cost incurred to replace flects the effect of non-performance risk, i.e. the risk that a part of the asset will flow to the Group and the cost of the an entity will not fulfill an obligation, including among oth- item can be measured reliably. All other costs are recognized ers the credit risk of the Group itself; in profit or loss as incurred. > in the case of groups of financial assets and financial liabil- The cost of replacing part or all of an asset is recognized as an ities with offsetting positions in market risk or credit risk, increase in the carrying amount of the asset and is depreciat- managed on the basis of an entity’s net exposure to such ed over its useful life; the net carrying amount of the replaced risks, it is permitted to measure fair value on a net basis. unit is derecognized through profit or loss. In measuring the fair value of assets and liabilities, the Group Property, plant and equipment, net of its residual value, is uses valuation techniques that are appropriate in the circum- depreciated on a straight-line basis over its estimated useful stances and for which sufficient data are available, maximizing life, which is reviewed annually and, if appropriate, adjusted the use of relevant observable inputs and minimizing the use prospectively. Depreciation begins when the asset is available of unobservable inputs. for use. 184 Consolidated Annual Report 2019The estimated useful life of the main items of property, plant charge at the end of the concessions. These mainly regard major water diversion works and the public lands used for the 10-70 years operation of the thermal power plants. 10-100 years Within the Italian regulatory framework in force until 2011, if and equipment is as follows: Civil buildings Buildings and civil works incorporated in plants Hydroelectric power plants: - penstocks - mechanical and electrical machinery - other fixed hydraulic works Thermal power plants: - boilers and auxiliary components - gas turbine components - mechanical and electrical machinery - other fixed hydraulic works Nuclear power plants Geothermal power plants: - cooling towers - turbines and generators - turbine parts in contact with fluid - mechanical and electrical machinery Wind power plants: - towers - turbines and generators - mechanical and electrical machinery Solar power plants: 7-85 years 5-60 years 5-100 years 3-59 years 3-59 years 3-59 years 3-62 years 50 years 20-25 years 25-30 years 10-25 years 20-40 years 20-30 years 20-30 years 15-30 years - mechanical and electrical machinery 20-30 years Public and artistic lighting: - public lighting installations - artistic lighting installations Transport lines Transformer stations Distribution plants: - high-voltage lines - primary transformer stations - low and medium-voltage lines Meters: - electromechanical meters - electricity balance measurement equipment - electronic meters 10-20 years 20 years 12-50 years 20-55 years 10-60 years 5-55 years 5-50 years 3-34 years 3-30 years 6-35 years The useful life of leasehold improvements is determined on the basis of the term of the lease or, if shorter, on the duration of the benefits produced by the improvements themselves. Land is not depreciated as it has an indefinite useful life. Assets recognized under property, plant and equipment are derecognized either upon their disposal (i.e., at the date the recipient obtains control) or when no future economic benefit is expected from their use or disposal. Any gain or loss, rec- ognized through profit or loss, is calculated as the difference between the net disposal proceeds, determined in accordance with the transaction price requirements of IFRS 15, and the net carrying amount of the derecognized assets. Assets to be relinquished free of charge The Group’s plants include assets to be relinquished free of the concessions are not renewed, at those dates all intake and governing works, penstocks, outflow channels and other assets on public lands were to be relinquished free of charge to the State in good operating condition. Accordingly, depre- ciation on assets to be relinquished was calculated over the shorter of the term of the concession and the remaining use- ful life of the assets. In the wake of the legislative changes introduced with Law 134 of August 7, 2012, the assets previously classified as assets “to be relinquished free of charge” connected with the hydroelectric water diversion concessions are now con- sidered in the same manner as other categories of “property, plant and equipment” and are therefore depreciated over the economic and technical life of the asset (where this exceeds the term of the concession), as discussed in the paragraph above on the “Depreciable value of certain elements of Ital- ian hydroelectric plants subsequent to enactment of Law 134/2012”, which you are invited to consult for more details. In accordance with Spanish laws 29/1985 and 46/1999, hy- droelectric power stations in Spanish territory operate under administrative concessions at the end of which the plants will be returned to the government in good operating condition. The terms of the concessions extend up to 2067. A number of generation companies that operate in Argentina, Brazil and Mexico hold administrative concessions with simi- lar conditions to those applied under the Spanish concession system. These concessions will expire by 2088. Infrastructures serving a concession As regards the distribution of electricity, the Group is a con- cession holder in Italy for this service. The concession, grant- ed by the Ministry for Economic Development, was issued free of charge and terminates on December 31, 2030. If the concession is not renewed upon expiry, the grantor is re- quired to pay an indemnity. The amount of the indemnity will be determined by agreement of the parties using appropriate valuation methods, based on both the balance-sheet value of the assets themselves and their profitability. In determining the indemnity, such profitability will be represent- ed by the present value of future cash flows. The infrastructure serving the concessions is owned and available to the conces- sion holder. It is recognized under “Property, plant and equip- ment” and is depreciated over the useful lives of the assets. 185 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsEnel also operates under administrative concessions for the distribution of electricity in other countries (including Spain and Romania). These concessions give the right to build and operate distribution networks for an indefinite period of time. Infrastructures within the scope of “IFRIC 12 - Service concession arrangements” Under a “public-to-private” service concession arrangement within the scope of “IFRIC 12 - Service concession arrange- ments”, the operator acts as a service provider and, in ac- cordance with the terms specified in the contract, it con- structs/upgrades the infrastructure used to provide a public service and operates and maintains that infrastructure for the period of the concession. The Group, as operator, does not account for the infrastruc- ture within the scope of IFRIC 12 as property, plant and equip- ment and it recognizes and measures revenue in accordance with IFRS 15 for the services it performs. In particular, when the Group provides construction or upgrade services, de- pending on the characteristics of the service concession ar- rangement, it recognizes: > a financial asset, if the Group has an unconditional con- tractual right to receive cash or another financial asset from the grantor (or from a third party at the direction of the grantor), that is the grantor has little discretion to avoid payment. In this case, the grantor contractually guarantees to pay to the operator specified or determinable amounts or the shortfall between the amounts received from the users of the public service and specified or determinable amounts (defined by the contract), and such payments are not dependent on the usage of the infrastructure; and/or > an intangible asset, if the Group receives the right (a li- cense) to charge users of the public service provided. In such a case, the operator does not have an unconditional right to receive cash because the amounts are contingent Leases The Group holds property, plant and equipment for its various activities under lease contracts. At inception of a contract, the Group assesses whether a contract is, or contains, a lease. For contracts entered into or changed on or after January 1, 2019, the Group has applied the definition of a lease un- der IFRS 16, that is met if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Conversely, for contracts entered into before January 1, 2019, the Group determined whether the arrangement was or contained a lease under IFRIC 4. Group as a lessee At commencement or on modification of a contract that con- tains a lease component and one or more additional lease or non-lease components, the Group allocates the considera- tion in the contract to each lease component on the basis of its relative stand-alone prices. The Group recognizes a right-of-use asset and a lease liability at the commencement date of the lease (i.e., the date the underlying asset is available for use). The right-of-use asset represents a lessee’s right to use an underlying asset for the lease term; it is initially measured at cost, which includes the initial amount of a lease liability adjusted for any lease payments made at or before the com- mencement date less any lease incentives received, plus any initial direct costs incurred and an estimate of costs to dis- mantle and remove the underlying asset and to restore the underlying asset or the site on which it is located. Right-of-use assets are subsequently depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the right-of-use assets, as follows: Average residual life (years) 7 31 5 on the extent that the public uses the service. Buildings If the Group (as operator) has a contractual right to receive Ground rights of renewable energy plants an intangible asset (a right to charge users of public service), Vehicles and other means of transport borrowing costs are capitalized using the criteria specified in the paragraph “Property, plant and equipment”. If ownership of the leased underlying asset transfers to the However, for construction/upgrade services, both types of Group at the end of the lease term or if the cost of the right- consideration are generally classified as a contract asset dur- of-use asset reflects the exercise of a purchase option, de- ing the construction/upgrade period. preciation is calculated using the estimated useful life of the For more details about such consideration, please see note underlying asset. 8.a “Revenue from sales and services”. In addition, the right-of-use assets are subject to impairment and adjusted for any remeasurement of lease liabilities. Fur- ther details about impairment are provided in the paragraph 186 Consolidated Annual Report 2019“Impairment of non-financial assets”. from accounting under IAS 17. The lease liability is initially measured at the present value of When the Group acts as a lessor, it determines at the lease lease payments to be made over the lease term. In calculat- inception date whether each lease is a finance lease or an ing the present value of lease payments, the Group uses the operating lease using the same classification principle under lessee’s incremental borrowing rate at the lease commence- IAS 17. ment date when the interest rate implicit in the lease is not If a contract contains lease and non-lease components, the readily determinable. Group allocates the consideration in the contract applying Variable lease payments that do not depend on an index or IFRS 15. a rate are recognized as expenses in the period in which the The Group accounts for rental income arising from operating event or condition that triggers the payment occurs. leases on a straight-line basis over the lease terms and it rec- After the commencement date, the lease liability is meas- ognizes them as other revenue. ured at amortized cost using the effective interest method and is remeasured upon the occurrence of certain events. The Group applies the short-term lease recognition exemption Investment property Investment property consists of the Group’s real estate held to its lease contracts that have a lease term of 12 months or to earn rentals and/or for capital appreciation rather than for less from the commencement date. It also applies the low-val- use in the production or supply of goods and services. ue assets recognition exemption to lease contracts for which Investment property is measured at acquisition cost less any the underlying asset is of low-value whose amount is estimated accumulated depreciation and any accumulated impairment not material. As example, the Group has leases of certain office losses. equipment (i.e., personal computers, printing and photocopying Investment property, excluding land, is depreciated on a machines) that are considered of low-value. Lease payments on straight-line basis over the useful lives of the related assets. short-term leases and leases of low-value assets are recognized Impairment losses are determined on the basis of the criteria as expense on a straight-line basis over the lease term. following described. The Group presents right-of-use assets that do not meet The breakdown of the fair value of investment property is the definition of investment property in “Property, plant and detailed in note 47 “Assets measured at fair value”. equipment” and lease liabilities in “Borrowings”. Investment property is derecognized either when it has been Consistent with the requirement of the standard, the Group transferred (i.e., at the date the recipient obtains control) or presents separately the interest expense on lease liabilities when it is permanently withdrawn from use and no future under “Other financial expense” and the depreciation charge economic benefit is expected from its disposal. Any gain or on the right-of-use assets under “Depreciation, amortization loss, recognized through profit or loss, is calculated as the and impairment losses”. difference between the net disposal proceeds, determined in Previously, in compliance with IAS 17, the Group classified accordance with the transaction price requirements of IFRS leases which transfer substantially all the risks and rewards in- 15, and the net book value of the derecognized assets. cidental to the ownership of the related asset to the lessee as Transfers are made to (or from) investment property only finance leases. In this case, leased assets were recognized at when there is a change in use. the lower of their fair value and the present value of the mini- mum lease payments due, including the payment required to exercise any purchase option. Subsequent to initial recognition, Intangible assets Intangible assets are identifiable assets without physical the assets were depreciated on the basis of their useful lives or, substance controlled by the entity and capable of generating if the Group was not reasonably certain to acquire the assets at future economic benefits. They are measured at purchase or the end of the lease, over the shorter of the lease term and the internal development cost when it is probable that the use of useful life of the assets. Leases which did not comply with the such assets will generate future economic benefits and the definition of a finance lease were classified as operating leases; related cost can be reliably determined. payments made under operating lease were recognized as a The cost includes any directly attributable expenses neces- cost on a straight-line basis over the lease term. sary to make the assets ready for their intended use. Group as a lessor Lessor accounting under IFRS 16 is substantially unchanged Development costs are recognized as an intangible asset only when Group can demonstrate the technical feasibility of completing the intangible asset, its intention and ability to 187 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementscomplete development and to use or sell the asset and the The Group also presents capitalized costs to obtain a contract availability of resources to complete the asset. with a customer within the scope of IFRS 15 in this item. Research costs are recognized as expenses. The Group recognizes such costs as an asset only if: Intangible assets with a finite useful life are reported net of > the costs are incremental, that is they are directly attrib- accumulated amortization and any impairment losses. utable to an identified contract and the Group would not Amortization is calculated on a straight-line basis over the have incurred them if the contract had not been obtained; item’s estimated useful life, which is reassessed at least an- > the Group expects to recover them, through reimburse- nually; any changes in amortization policies are reflected on a ments (direct recoverability) or the margin (indirect recov- prospective basis. Amortization commences when the asset erability). is ready for use. Consequently, intangible assets not yet avail- In particular, the Group generally capitalizes trade fees and able for use are not amortized, but are tested for impairment commissions paid to agents for such contracts if the capital- at least annually. ization criteria are met. The Group’s intangible assets have a definite useful life, with Capitalized contract costs are amortized on a systematic ba- the exception of a number of concessions and goodwill. sis, consistent with the pattern of the transfer of the goods Intangible assets with indefinite useful lives are not amor- or services to which they relate, and undergo impairment tized, but are tested for impairment annually. testing to identify any impairment losses to the extent that The assessment of indefinite life is reviewed annually to de- the carrying amount of the asset recognized exceeds the re- termine whether the indefinite life continues to be supporta- coverable amount. ble. If not, the change in useful life from indefinite to finite is The Group amortizes the capitalized contract costs on a accounted for as a change in accounting estimate. straight-line basis over the expected period of benefit from Intangible assets are derecognized either at the time of their the contract (i.e., the average term of the customer relation- disposal (at the date when the recipient obtains control) or ship); any changes in amortization policies are reflected on a when no future economic benefit is expected from their use prospective basis. or disposal. Any gain or loss, recognized through profit or The Group does not incur any costs to fulfil a contract that are loss, is calculated as the difference between the net consid- eligible for capitalization. eration received in the disposal, determined in accordance with the provisions of IFRS 15 concerning the transaction price, and the net book value of the derecognized assets. Goodwill Goodwill arises on the acquisition of subsidiaries and rep- The estimated useful life of the main intangible assets, distin- resents the excess of the acquisition cost, of any non-con- guishing between internally generated and acquired assets, trolling interest and of any previously held interest over the is as follows: Development costs: - internally generated - acquired acquisition date fair value of the acquiree’s assets, liabilities and identifiable contingent liabilities. After initial recognition, goodwill is not amortized, but is tested for recoverability at 2-26 years least annually using the criteria described in the paragraph 3-26 years “Impairment of non-financial assets”. For the purpose of im- Industrial patents and intellectual property rights: pairment testing, goodwill is allocated, from the acquisition - internally generated - acquired Concessions, licenses, trademarks and similar rights: - internally generated - acquired Intangible assets from service concession arrangements: - internally generated - acquired Other: - internally generated - acquired 188 3-10 years 2-50 years 20 years 1-40 years - 5 years 2-28 years 1-28 years date, to each of the cash generating units (CGUs) that are expected to benefit from the synergies of the combination. Goodwill relating to equity investments in associates and joint ventures is included in their carrying amount. Impairment of non-financial assets At each reporting date, non-financial assets are reviewed to determine whether there is evidence of impairment. Goodwill, intangible assets with an indefinite useful life and intangible assets not yet available for use are tested for re- coverability annually or more frequently if there is evidence suggesting that the assets can be impaired. Consolidated Annual Report 2019If such evidence exists, the recoverable amount of any in- volved asset is estimated on the basis of the use of the as- set and their future disposal, in accordance with the Group’s most recent business plan. For the estimate of the recov- tificates, energy efficiency certificates and CO2 emissions allowances) that were not utilized for compliance in the re- porting period. As regards CO2 emissions allowances, inven- tories are allocated between the trading portfolio and the erable amount, please refer to the paragraph “Use of esti- compliance portfolio, i.e. those used for compliance with mates”. The recoverable amount is determined for an individual as- set, unless the asset do not generate cash inflows that are greenhouse gas emissions requirements. Within the latter, CO2 emissions allowances are allocated to sub-portfolios on the basis of the compliance year to which they have been largely independent of those from other assets or groups of assigned. assets and therefore it is determined for the cash generating Inventories also include nuclear fuel stocks, use of which is unit (CGU) to which the asset belongs. determined on the basis of the electricity generated. If the carrying amount of an asset or of a CGU to which it is Materials and other consumables (including energy commod- allocated is greater than its recoverable amount, an impair- ities) held for use in production are not written down if it is ment loss is recognized in profit or loss under “Depreciation, expected that the final product in which they will be incorpo- amortization and impairment losses”. rated will be sold at a price sufficient to enable recovery of Impairment losses of CGUs are firstly charged against the car- the cost incurred. rying amount of any goodwill attributed to it and then against the other assets, in proportion to their carrying amount. If the reasons for a previously recognized impairment loss no Financial instruments Financial instruments are any contract that gives rise to a finan- longer obtain, the carrying amount of the asset is restored cial asset of one entity and a financial liability or equity instru- through profit or loss, under “Depreciation, amortization and ment of another entity; they are recognized and measured in impairment losses”, in an amount that shall not exceed the accordance with IAS 32 and IFRS 9. net carrying amount that the asset would have had if the im- A financial asset or liability is recognized in the consolidated fi- pairment loss had not been recognized and depreciation or nancial statements when, and only when, the Group becomes amortization had been performed. The original value of good- party to the contractual provision of the instrument (trade date). will is not restored even if in subsequent years the reasons Trade receivables arising from contracts with customers, in for the impairment no longer obtain. the scope of IFRS 15, are initially measured at their transaction If certain specific identified assets owned by the Group are price (as defined in IFRS 15) if such receivables do not contain impacted by adverse economic or operating conditions that a significant financing component or when the Group applies undermine their capacity to contribute to the generation of the practical expedient allowed by IFRS 15. cash flows, they can be isolated from the rest of the assets Conversely, the Group initially measures financial assets other of the CGU, undergo separate analysis of their recoverability than receivables above-mentioned at their fair value plus, in the and impaired where necessary. case of a financial asset not at fair value through profit or loss, transaction costs. Inventories Inventories are measured at the lower of cost and net realiz- Financial assets are classified, at initial recognition, as financial assets at amortized cost, at fair value through other compre- able value except for inventories involved in trading activities, hensive income and at fair value through profit or loss, on the which are measured at fair value with recognition through basis of both Group’s business model and the contractual cash- profit or loss. Cost is determined on the basis of average flow characteristics of the instrument. weighted cost, which includes related ancillary charges. Net For this purpose, the assessment to determine whether the in- estimated realizable value is the estimated normal selling strument gives rise to cash flows that are solely payments of prin- price net of estimated costs to sell or, where applicable, re- cipal and interest (SPPI) on the principal amount outstanding is re- placement cost. ferred to as the SPPI test and is performed at an instrument level. For the portion of inventories held to discharge sales that The Group’s business model for managing financial assets re- have already been made, the net realizable value is deter- fers to how it manages its financial assets in order to gener- mined on the basis of the amount established in the contract ate cash flows. The business model determines whether cash of sale. flows will result from collecting contractual cash flows, selling Inventories include environmental certificates (green cer- the financial assets, or both. 189 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsFor purposes of subsequent measurement, financial assets are classified in four categories: > financial assets measured at amortized cost (debt instru- ments); > financial assets at fair value through other comprehensive income with recycling of cumulative gains and losses (debt instruments); Financial assets at fair value through other comprehensive income (FVOCI) - Equity instruments This category includes mainly equity investments in unlisted entities irrevocably designated as such upon initial recognition. Gains and losses on these financial assets are never recycled to profit or loss. The Group may transfer the cumulative gain or loss within equity. > financial assets designated at fair value through other com- prehensive income with no recycling of cumulative gains and losses upon derecognition (equity instruments); and > financial assets at fair value through profit or loss. Equity instruments designated at fair value through other com- prehensive income are not subject to impairment assessment. Dividends on such investments are recognized in profit or loss unless they clearly represent a recovery of a part of the cost of Financial assets measured at amortized cost This category mainly includes trade receivables, other receiva- bles and financial receivables. Financial assets at amortized cost are held within a business model whose objective is to hold financial assets in order to col- lect contractual cash flows and whose contractual terms give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding. Such assets are initially recognized at fair value, adjusted for any transaction costs, and subsequently measured at amor- tized cost using the effective interest method and are subject to impairment. the investment. Financial assets at fair value through profit or loss This category mainly includes: securities, equity investments in other entities, financial investment in fund held for trading and financial assets designated as at fair value through profit or loss at initial recognition. Financial assets at fair value through profit or loss are: > financial assets with cash flows that are not solely pay- ments of principal and interest, irrespective of the busi- ness model; > financial assets held for trading because acquired or in- curred principally for the purpose of selling or repurchasing Gains and losses are recognized in profit or loss when the as- in short term; set is derecognized, modified or impaired. Financial assets at fair value through other comprehensive income (FVOCI) - Debt instruments This category mainly includes listed debt securities not classi- fied as held for trading by the Group’s reinsurance company. Financial assets at fair value through other comprehensive income are assets held within a business model whose ob- jective is achieved by both collecting contractual cash flows and selling financial assets and whose contractual cash flows give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding. Changes in fair value for these financial assets are recognized in other comprehensive income as well as loss allowances > debt instruments designated upon initial recognition, un- der the option allowed by IFRS 9 (fair value option) if doing so eliminates, or significantly reduces, an accounting mis- match; > derivatives, including separated embedded derivatives, held for trading or not designated as effective hedging in- struments. Such financial assets are initially recognized at fair value with subsequent gains and losses from changes in their fair value recognized through profit or loss. This category include also listed equity investments which the Group had not irrevocably elected to classify at fair value through other comprehensive income. Dividends on listed eq- uity investments are also recognized as other income in the statement of profit or loss when the right of payment has been that do not reduce the carrying amount of the financial assets. established. When a financial asset is derecognized (e.g., at the time of sale), the cumulative gains and losses previously recognized in equity (except impairment and foreign exchange gains and losses to be recognized in profit or loss) are reversed to the income statement. Financial assets that qualify as contingent consideration are also measured at fair value through profit or loss. Impairment of financial assets At the end of each reporting date, the Group recognizes a loss allowance for expected credit losses on trade receivables and other financial assets measured at amortized cost, debt instru- 190 Consolidated Annual Report 2019ments measured at fair value through other comprehensive whose counterparty has a strong financial capacity to meet its income, contract assets and all other assets in the scope. contractual cash-flow obligations (e.g., investment grade). In compliance with IFRS 9, as from January 1, 2018, the Group adopted a new impairment model based on the determination of expected credit losses (ECL) using a forward-looking ap- Cash and cash equivalents This category includes deposits that are available on demand or proach. In essence, the model provides for: at very short term, as well as highly short-term liquid financial > the application of a single framework for all financial as- investments that are readily convertible into a known amount sets; of cash and which are subject to insignificant risk of changes > the recognition of expected credit losses on an ongoing in value. basis and the updating of the amount of such losses at In addition, for the purpose of the consolidated statement of the end of each reporting period, reflecting changes in the cash flows, cash and cash equivalents do not include bank credit risk of the financial instrument; overdrafts at period-end. > the measurement of expected losses on the basis of rea- sonable information, obtainable without undue cost, about past events, current conditions and forecasts of future con- Financial liabilities at amortized cost This category mainly includes borrowings, trade payables, fi- ditions. nance leases and debt instruments. For trade receivables, contract assets and lease receivables, Financial liabilities, other than derivatives, are recognized when including those with a significant financial component, the the Group becomes a party to the contractual clauses of the Group adopts the simplified approach, determining expected instrument and are initially measured at fair value adjusted for credit losses over a period corresponding to the entire life of directly attributable transaction costs. Financial liabilities are the receivable, generally equal to 12 months. subsequently measured at amortized cost using the effective For all financial assets other than trade receivables, contract interest rate method. assets and lease receivables, the Group applies the general approach under IFRS 9, based on the assessment of a signifi- cant increase in credit risk since initial recognition. Under such approach, a loss allowance on financial assets is recognized at Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include fi- an amount equal to the lifetime expected credit losses, if the nancial liabilities held for trading and financial liabilities designat- credit risk on those financial assets has increased significantly, ed upon initial recognition as at fair value through profit or loss. since initial recognition, considering all reasonable and support- Financial liabilities are classified as held for trading if they are able information, including also forward-looking inputs. incurred for the purpose of repurchasing in the near term. This If at the reporting date, the credit risk on financial assets has category also includes derivative financial instruments entered not increased significantly since initial recognition, the Group into by the Group that are not designated as hedging instru- measures the loss allowance for those financial assets at an ments in hedge relationships as defined by IFRS 9. Separat- amount equal to 12-month expected credit losses. ed embedded derivatives are also classified as at fair value For financial assets on which loss allowance equal to lifetime through profit or loss unless they are designated as effective expected credit losses has been recognized in the previous hedging instruments. reporting date, the Group measures the loss allowance at an Gains or losses on liabilities at fair value through profit or loss amount equal to 12-month expected credit losses when signif- are recognized through profit or loss. icant increase in credit risk condition is no longer met. Financial liabilities designated upon initial recognition at fair val- The Group recognizes in profit or loss, as impairment gain or ue through profit or loss are designated at the initial date of loss, the amount of expected credit losses (or reversal) that recognition, only if the criteria in IFRS 9 are satisfied. is required to adjust the loss allowance at the reporting date In this case, the portion of the change in fair value attributa- to the amount that is required to be recognized in accordance ble to own credit risk is recognized in other comprehensive with IFRS 9. income. The Group applies the low credit risk exemption, avoiding the rec- The Group has not designated any financial liability as at fair ognition of loss allowances at an amount equal to lifetime expect- value through profit or loss, upon initial recognition. ed credit losses due to significant increase in credit risk of debt Financial liabilities that qualify as contingent consideration are securities at fair value through other comprehensive income, also measured at fair value through profit or loss. 191 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsDerecognition of financial assets and liabilities Financial assets are derecognized whenever one of the follow- of their maturity date and the Group intention to hold the finan- cial instrument till maturity or not. ing conditions is met: > the contractual right to receive the cash flows associated with the asset expires; > the Group has transferred substantially all the risks and re- wards associated with the asset, transferring its rights to receive the cash flows of the asset or assuming a contrac- tual obligation to pay such cash flows to one or more ben- eficiaries under a contract that meets the requirements provided by IFRS 9 (the “pass through test”); > the Group has not transferred or retained substantially all the risks and rewards associated with the asset but has transferred control over the asset. Financial liabilities are derecognized when they are extin- guished, i.e. when the contractual obligation has been dis- charged, cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an ex- change or modification is treated as the derecognition of the original liability and the recognition of a new liability. The differ- Embedded derivatives An embedded derivative is a derivative included in a “combined” contract (the so-called “hybrid instrument”) that contains anoth- er non-derivative contract (the so-called host contract) and gives rise to some or all of the combined contract’s cash flows. The main Group’s contracts that may contain embedded deriva- tives are contracts to buy or sell non-financial items with claus- es or options that affect the contract price, volume or maturity. A derivative embedded in a hybrid contract containing a finan- cial asset host is not accounted for separately. The financial asset host together with the embedded derivative is required to be classified in its entirety as a financial asset at fair value through profit or loss. Contracts that do not represent financial instruments to be measured at fair value are analyzed in order to identify any em- bedded derivatives, which are to be separated and measured at fair value. This analysis is performed when the Group becomes party to the contract or when the contract is renegotiated in a manner that significantly changes the original associated cash ence in the respective carrying amounts is recognized in profit flows. or loss. Derivative financial instruments A derivative is a financial instrument or another contract: > whose value changes in response to the changes in an un- derlying variable such as an interest rate, commodity or Embedded derivatives are separated from the host contract and accounted for as derivatives when: > host contract is not a financial instrument measured at fair value through profit or loss; > the economic risks and characteristics of the embedded derivative are not closely related to those of the host con- security price, foreign exchange rate, a price or rate index, tract; a receivable rating or other variable; > that requires no initial net investment, or one that is small- er than would be required for a contract with similar re- sponse to changes in market factors; > that is settled at a future date. Derivative instruments are classified as financial assets or li- > a separate contract with the same terms as the embedded derivative would meet the definition of a derivative. Embedded derivatives that are separated from the host con- tract are recognized in the consolidated financial statements at fair value with changes recognized in profit or loss (except when the embedded derivative is part of a designated hedging abilities depending on the positive or negative fair value and relationship). they are classified as “held for trading” within “Other business models” and measured at fair value through profit or loss, ex- cept for those designated as effective hedging instruments. For more details about hedge accounting, please refer to note 46 “Derivatives and hedge accounting”. All derivatives held for trading are classified as current assets or liabilities. Contracts to buy or sell non-financial items In general, contracts to buy or sell non-financial items that are entered into and continue to be held for receipt or delivery in accordance with the Group’s normal expected purchase, sale or usage requirements are out of the scope of IFRS 9 and then recognized as executory contracts, according to the “own use Derivatives not held for trading purposes, but measured at fair exemption”. value through profit or loss since they do not qualify for hedge accounting, and derivatives designated as effective hedging in- struments are classified as current or not current on the basis Such contracts are recognized as derivatives and, as a conse- quence, at fair value through profit or loss only if: > they can be settled net in cash; and 192 Consolidated Annual Report 2019 > they are not entered into in accordance with the Group’s interest in its former subsidiary after the sale. expected purchase, sale or usage requirements. The Group applies these classification criteria as envisaged in A contract to buy or sell non-financial items is classified as IFRS 5 to an investment, or a portion of an investment, in an as- “normal purchase or sale” if it is entered into: sociate or a joint venture. Any retained portion of an investment > for the purpose of the physical delivery; in an associate or a joint venture that has not been classified > in accordance with the entity’s expected purchase, sale or as held for sale is accounted for using the equity method until usage requirements. disposal of the portion that is classified as held for sale takes The Group analyses all contracts to buy or sell non-financial place. assets, with a specific focus on forward purchases and sales Non-current assets (or disposal groups) and liabilities of dispos- of electricity and energy commodities, in order to determine al groups classified as held for sale are presented separately if they shall be classified and treated according to IFRS 9 or if from other assets and liabilities in the balance sheet. they have been entered into for “own use”. The amounts presented for non-current assets or for the as- Offsetting financial assets and liabilities The Group offsets financial assets and liabilities when: sets and liabilities of disposal groups classified as held for sale are not reclassified or re-presented for prior periods presented. Immediately before the initial classification of non-current as- > there is a legally enforceable right to set off the recognized sets (or disposal groups) as held for sale, the carrying amounts amounts; and of such assets (or disposal groups) are measured in accordance > there is the intention of either to settle on a net basis, or with the IFRS/IAS applicable to the specific assets or liabilities. to realize the asset and settle the liability simultaneously. Non-current assets (or disposal groups) classified as held for sale are measured at the lower of their carrying amount and Hyperinflation In a hyperinflationary economy, the Group adjusts non-mon- fair value less costs to sell. Impairment losses for any initial or subsequent write-down of the assets (or disposal groups) etary items, shareholders’ equity and items deriving from in- to fair value less costs to sell and gains for their reversals are dex-linked contracts up to the limit of recoverable value, using included in profit or loss from continuing operations. a price index that reflects changes in general purchasing power. Non-current assets are not depreciated (or amortized) while The effects of initial application are recognized in equity net they are classified as held for sale or while they are part of a of tax effects. Conversely, during the hyperinflationary period disposal group classified as held for sale. (until it ceases), the result (gain or loss) of adjustments is rec- If the classification criteria are no longer met, the Group ceases ognized in profit or loss and disclosed separately in financial to classify non-current assets (or disposal group) as held for income and expense. sale. In that case they are measured at the lower of: Starting from 2018, this standard applies to the Group’s trans- > the carrying amount before the asset (or disposal group) actions in Argentina, whose economy has been declared hy- was classified as held for sale, adjusted for any depreci- perinflationary from July 1, 2018. Non-current assets (or disposal groups) classified as held for sale and discontinued operations Non-current assets (or disposal groups) are classified as held ation, amortization or revaluations that would have been recognized if the asset (or disposal group) had not been classified as held for sale; and > the recoverable amount, which is equal to the greater of its fair value net of costs of disposal and its value in use, as calculated at the date of the subsequent decision not for sale if their carrying amount will be recovered principally to sell. through a sale transaction, rather than through continuing use. Any adjustment to the carrying amount of a non-current asset This classification criteria is applicable only when non-current that ceases to be classified as held for sale is included in profit assets (or disposal groups) are available in their present condi- or loss from continuing operations. tion for immediate sale and the sale is highly probable. A discontinued operation is a component of the Group that ei- If the Group is committed to a sale plan involving loss of control ther has been disposed of, or is classified as held for sale, and: of a subsidiary and the requirements provided for under IFRS 5 > represents a separate major line of business or geographi- are met, all the assets and liabilities of that subsidiary are clas- cal area of operations; sified as held for sale when the classification criteria are met, > is part of a single coordinated plan to dispose of a separate regardless of whether the Group will retain a non-controlling major line of business or geographical area of operations; or 193 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements > is a subsidiary acquired exclusively with a view to resale. ating expenses, as they represent “system charges” conse- The Group presents, in a separate line item of the income quent upon compliance with a regulatory requirement. statement, a single amount comprising the total of: > the post-tax profit or loss of discontinued operations; and > the post-tax gain or loss recognized on the measurement to Employee benefits Liabilities related to employee benefits paid upon or after ceas- fair value less costs to sell or on the disposal of the assets ing employment in connection with defined benefit plans or or disposal groups constituting the discontinued operation. other long-term benefits accrued during the employment pe- The corresponding amount is re-presented in the income state- riod are determined separately for each plan, using actuarial ment for prior periods presented in the financial statements, assumptions to estimate the amount of the future benefits so that the disclosures relate to all operations that are discon- that employees have accrued at the balance-sheet date (the tinued by the end of the current reporting period. If the Group projected unit credit method). More specifically, the present ceases to classify a component as held for sale, the results value of the defined benefit obligation is calculated by using a of the component previously presented in discontinued oper- discount rate determined on the basis of market yields at the ations are reclassified and included in income from continuing end of the reporting period on high-quality corporate bonds. If operations for all periods presented. there is no deep market for high-quality corporate bonds in the Environmental certificates Some Group companies are affected by national regulations yield of government securities is used. The liability is recognized on an accruals basis over the vesting governing green certificates and energy efficiency certifi- period of the related rights. These appraisals are performed by currency in which the bond is denominated, the corresponding cates (so-called white certificates), as well as the European independent actuaries. “Emissions Trading System”. If the value of plan assets exceeds the present value of the Green certificates, which now only exist outside of Italy, related defined benefit obligation, the surplus (up to the limit of accrued in proportion to electricity generated by renewable any cap) is recognized as an asset. energy plants and energy efficiency certificates accrued in As regards the liabilities/(assets) of defined benefit plans, the proportion to energy savings achieved that have been certi- cumulative actuarial gains and losses from the actuarial meas- fied by the competent authority are treated as non-monetary urement of the liabilities, the return on the plan assets (net government operating grants and are recognized at fair value, of the associated interest income) and the effect of the asset under other operating income, with recognition of an asset ceiling (net of the associated interest income) are recognized under other non-financial assets, if the certificates are not in other comprehensive income when they occur. For other yet credited to the ownership account, or under inventories, long-term benefits, the related actuarial gains and losses are if the certificates have already been credited to that account. recognized through profit or loss. At the time the certificates are credited to the ownership ac- In the event of a change being made to an existing defined count, they are reclassified from other assets to inventories. benefit plan or the introduction of a new plan, any past service Revenue from the sale of such certificates are recognized cost is recognized immediately in profit or loss. under revenue from contracts with customers, with a corre- Employees are also enrolled in defined contribution plans un- sponding decrease in inventories. der which the Group pays fixed contributions to a separate For the purposes of accounting for charges arising from reg- entity (a fund) and has no legal or constructive obligation to pay ulatory requirements concerning green certificates, energy efficiency certificates and CO2 emissions allowances, the Group uses the “net liability approach”. further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. Such plans are usually aimed to Under this accounting policy, environmental certificates re- supplement pension benefits due to employees post-employ- ceived free of charge and those self-produced as a result of ment. The related costs are recognized in income statement Group’s operations that will be used for compliance purpos- on the basis of the amount of contributions paid in the period. es are recognized at nominal value (nil). In addition, charges incurred for obtaining (in the market or in some other trans- action for consideration) any missing certificates to fulfil com- Termination benefits Liabilities for benefits due to employees for the early termina- pliance requirements for the reporting period are recognized tion of the employment relationship, both for a Group’s deci- through profit or loss on an accruals basis under other oper- sion and for an employee’s decision to accept voluntary redun- 194 Consolidated Annual Report 2019dancy in exchange for these benefits, are recognized at the customers in the scope of IFRS 15, in accordance with the earlier of the following dates: contract, the law or its customary business practices. In this > when the entity can no longer withdraw its offer of bene- case, the Group assesses whether the warranty provides the fits; and customer with assurance that the related product will function > when the entity recognizes a cost for a restructuring that as the parties intended because it complies with agreed-upon is within the scope of IAS 37 and involves the payment of specifications or whether the warranty provides the customer termination benefits. with a service in addition to the assurance that the product The liabilities are measured on the basis of the nature of the complies with agreed-upon specifications. employee benefits. More specifically, when the benefits repre- After the assessment, if the Group establishes that an assur- sent an enhancement of other post-employment benefits, the ance warranty is provided, it recognizes a separate warranty associated liability is measured in accordance with the rules liability and corresponding expense when transferring the prod- governing that type of benefits. Otherwise, if the termination uct to the customer, as additional costs of providing goods or benefits due to employees are expected to be settled wholly services, without attributing any of the transaction price (and before 12 months after the end of the annual reporting peri- therefore revenue) to the warranty. The liability is measured od, the entity measures the liability in accordance with the re- and presented as a provision. quirements for short-term employee benefits; if they are not Otherwise, if the Group determines that a service warranty expected to be settled wholly before 12 months after the end is provided, it accounts for the promised warranty as a perfor- of the annual reporting period, the entity measures the liability mance obligation in accordance with IFRS 15, recognizing the in accordance with the requirements for other long-term em- contract liability as revenue over the period the warranty ser- ployee benefits. Provisions for risks and charges Provisions are recognized where there is a legal or constructive vice is provided and the costs associated as they are incurred. Finally, if the warranty includes both an assurance element and a service element and the Group cannot reasonably account for them separately, then it accounts for both of the warranties obligation as a result of a past event at the end of the report- together as a single performance obligation. ing period, the settlement of which is expected to result in an In the case of contracts in which the unavoidable costs of meet- outflow of resources whose amount can be reliably estimated. ing the obligations under the contract exceed the economic Where the impact is significant, the accruals are determined by benefits expected to be received under it (onerous contracts), discounting expected future cash flows using a pre-tax discount the Group recognizes a provision as the lower of the costs of rate that reflects the current market assessment of the time val- fulfilling the obligation that exceed the economic benefits ex- ue of money and, if applicable, the risks specific to the liability. pected to be received under the contract and any compensa- If the provision is discounted, the periodic adjustment of the tion or penalty arising from failure to fulfil it. present value for the time factor is recognized as a financial Changes in estimates of accruals to the provision are rec- expense. ognized in the income statement in the period in which the When the Group expects some or all of a provision to be reim- changes occur, with the exception of those in the costs of de- bursed, the reimbursement is recognized as a separate asset, commissioning, dismantling and/or restoration resulting from but only when the reimbursement is virtually certain. changes in the timetable and costs necessary to extinguish the Where the liability relates to decommissioning and/or site res- obligation or from a change in the discount rate. These changes toration in respect of property, plant and equipment, the initial increase or decrease the value of the related assets and are recognition of the provision is made against the related asset taken to the income statement through depreciation. Where and the expense is then recognized in profit or loss through the they increase the value of the assets, it is also determined depreciation of the asset involved. whether the new carrying amount of the assets is fully recov- Where the liability regards the treatment and storage of nucle- erable. If this is not the case, a loss equal to the unrecoverable ar waste and other radioactive materials, the provision is recog- amount is recognized in the income statement. nized against the related operating costs. Decreases in estimates are recognized up to the carrying Provisions do not include liabilities for uncertain income tax amount of the assets. Any excess is recognized immediately treatments that are recognized as tax liabilities. in the income statement. The Group could provide a warranty in connection with the sale For more information on the estimation criteria adopted in de- of a product (whether a good or service) from contracts with termining provisions for dismantling and/or restoration of pro- 195 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsperty, plant and equipment, especially those associated with consideration, non-cash consideration received from a nuclear power plants, please refer to the paragraph “Use of customer, consideration payable to a customer and a sig- estimates”. nificant financing component; > allocate the transaction price (step 4). Revenue from contracts with customers The Group recognizes revenue from contracts with customers The Group allocates the transaction price at contract incep- tion to each separate performance obligation to depict the amount of consideration to which the Group expects to be in order to represent the transfer of promised goods or servic- entitled in exchange for transferring the promised goods es to the customers at an amount that reflects the considera- or services. tion at which the Group expects to be entitled in exchange for When the contract includes a customer option to acquire those goods or services. additional goods or services that represents a materi- The Group applies this core principle using a five-step model: al right, the Group allocates the transaction price to this > identify the contract with the customer (step 1). performance obligation (i.e., the option) and defers the The Group applies IFRS 15 to contracts with customers in relative revenue until those future goods or services are the scope of the standard when the contract is legally en- transferred or the option expires. forceable and all the criteria envisaged for step 1 are met. The Group generally allocates the transaction price on the If the criteria are not met, any consideration received from basis of the relative stand-alone selling price of each dis- the customer is generally recognized as an advance; tinct good or service promised in the contract (that is, the > identify the performance obligations in the contract (step 2). price at which the Group would sell that good or service The Group identifies all goods or services promised in the separately to the customer); contract, separating them into performance obligations to > recognize revenue (step 5). account for separately if they are both: capable of being The Group recognizes revenue when (or as) each perfor- distinct and distinct in the context of the contract. mance obligation is satisfied by transferring the promised As an exception, the Group accounts for a single perfor- good or service to the customer, which is when the cus- mance obligation a series of distinct goods or services that tomer obtains control of the good or service. are substantially the same and that have the same pattern As a first step, the Group determines if one of the over- of transfer to the customer over time. time criteria is met. In assessing the existence and the nature of the perfor- For each performance obligation satisfied over time, the mance obligations, the Group considers all contract’s fea- Group recognizes revenue over time by measuring pro- tures as mentioned in step 1. gress toward the complete satisfaction of that performance For each distinct good or service identified, the Group de- obligation using an output method or an input method and termines whether it acts as a principal or agent, respective- applies a single method of measuring progress from con- ly if it controls or not the specified good or service that is tract inception until full satisfaction and to similar perfor- promised to the customer before its control is transferred mance obligations and in similar circumstances. to the customer. When the Group acts as agent, it recog- When the Group cannot reasonably measure the progress, nizes revenue on a net basis, corresponding to any fee or it recognizes revenue only to the extent of the costs in- commission to which it expects to be entitled; curred that are considered recoverable. > determine the transaction price (step 3). If the performance obligation is not satisfied over time, the The transaction price represents the amount of considera- Group determines the point in time at which the customer tion to which the Group expects to be entitled in exchange obtains the control, considering whether the indicators of for transferring goods or services to a customer, excluding the transfer of control collectively indicate that the custom- amounts collected on behalf of third parties (e.g., some er has obtained control. sale taxes and value-added taxes). Depending on the type of transaction, the broad criteria The Group determines the transaction price at inception of used under IFRS 15 are summarized below: the contract and updates it at each reporting period for any - revenue from the sale of goods is recognized at the changes in circumstances. point in time at which the customer obtains the control When the Group determines the transaction price, it con- of goods if the Group considers that the sale of goods siders whether the transaction price includes variable is satisfied at a point in time; 196 Consolidated Annual Report 2019- revenue from providing services is recognized on the Government grants, including non-monetary grants at fair val- basis of the progress towards complete satisfaction of ue, are recognized where there is reasonable assurance that the performance obligation measured with an appropri- they will be received and that the Group will comply with all ate method that better depicts this progress if the Group conditions attaching to them as set by the government, gov- considers that the performance obligation is satisfied ernment agencies and similar bodies, whether local, national over time. The cost incurred method (cost-to-cost meth- or international. od) is considered appropriate for measuring progress, ex- When loans are provided by governments at a below-market cept when specific contract analysis suggest the use of rate of interest, the benefit is regarded as a government grant. an alternative method, which better depicts the Group’s The loan is initially recognized and measured at fair value and performance obligation fulfilled at the reporting date. the government grant is measured as the difference between The Group does not disclose the information about the remaining the initial carrying amount of the loan and the funds received. performance obligations in existing contracts if the performance The loan is subsequently measured in accordance with the re- obligation is part of a contract that has an original expected du- quirements for financial liabilities. ration of one year or less and if the Group recognizes revenue in Government grants are recognized in profit or loss on a sys- the amount to which it has a right to invoice the customer. tematic basis over the periods in which the Group recognizes as expenses the costs that the grants are intended to com- Further details on the application of this revenue recognition pensate. model are provided in the paragraph “Management judg- Where the Group receives government grants in the form of ments” and in note 8.a “Revenue from sales and services”. a transfer of a non-monetary asset for the use of the Group, it If the Group performs by transferring goods or services to a accounts for both the grant and the asset at the fair value of the customer before the customer pays consideration or before non-monetary asset received at the date of the transfer. payment is due, it recognizes a contract asset relating to the Grants related to long-lived assets, including non-monetary right to consideration in exchange for goods or services trans- grants at fair value, i.e. those received to purchase, build or ferred to the customer. otherwise acquire non-current assets (for example, an item If a customer pays consideration before the Group transfers of property, plant and equipment or an intangible asset), are goods or services to the customer, the Group recognizes a recognized on a deferred basis under other liabilities and are contract liability when the payment is made (or the payment is credited to profit or loss on a straight-line basis over the useful due) that is recognized as revenue when the Group performs life of the asset. under the contract. Other revenue The Group recognizes revenue other than those related to con- Financial income and expense from derivatives Financial income and expense from derivatives includes: tracts with customers mainly referring to: > income and expense from derivatives measured at fair val- > revenue from contracts to sell energy commodities at a ue through profit or loss on interest rate and foreign ex- future date and a fixed price with physical settlement that change risk; do not meet the own use exemption and therefore is rec- > income and expense from fair value hedge derivatives on ognized according to IFRS 9; interest rate risk; > results from changes in fair value of contracts to sell at > income and expense from cash flow hedge derivatives on a future date energy commodities with physical delivery interest rate and foreign exchange risks. under IFRS 9; > operating lease revenue accounted for on an accrual ba- sis in accordance with the substance of the relevant lease agreement. Other operating income Other operating income primarily include gains on the disposal Other financial income and expense For all financial assets and liabilities measured at amortized cost and interest-bearing financial assets classified as at fair value through other comprehensive income, interest income and expense is recorded using the effective interest rate method. The effective interest rate is the rate that exactly dis- of assets that are not an output of the Group’s ordinary activi- counts the estimated future cash payments or receipts over ties and government grants. the expected life of the financial instrument or a shorter period, 197 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementswhere appropriate, to the net carrying amount of the financial Deferred tax assets are recognized for all deductible tempo- asset or liability. rary differences, the carry forward of unused tax credits and Interest income is recognized to the extent that it is proba- any unused tax losses, when recovery is probable, i.e. when ble that the economic benefits will flow to the Group and the an entity expects to have sufficient future taxable income to amount can be reliably measured. recover the asset. Other financial income and expense include also changes in The recoverability of deferred tax assets is reviewed at each the fair value of financial instruments other than derivatives. period-end. Dividends Dividends are recognized when the unconditional right to re- porting date and they are recognized to the extent that it has become probable that future taxable profits will allow the de- Unrecognized deferred tax assets are re-assessed at each re- ceive payment is established. ferred tax asset to be recovered. Dividends and interim dividends payable to a company’s share- Deferred taxes are recognized in profit or loss, with the excep- holders are recognized as changes in equity in the period in tion of those in respect of items recognized outside profit or which they are approved by the Shareholders’ Meeting and the loss that are recognized in equity. Board of Directors, respectively. Income taxes Deferred tax assets and deferred tax liabilities are offset against current tax liabilities related to income taxes levied by the same taxation authority that arise at the time of reversal if a legally enforceable right to set-off exists. Current income taxes Current income taxes for the period, which are recognized un- der “income tax payable” net of payments on account, or un- Uncertainty over income tax treatments In defining ‘uncertainty’, it shall be considered whether a par- der “tax receivable” where there is a credit balance, are deter- ticular tax treatment will be accepted by the relevant taxation mined using an estimate of taxable income and in conformity authority. If it is deemed probable that the tax treatment will be with the applicable regulations. accepted (where the term ‘probable’ is defined as ‘more likely In particular, such payables and receivables are determined us- than not’), then the Group recognizes and measures its cur- ing the tax rates and tax laws that are enacted or substantive- rent/deferred tax asset or liabilities applying the requirements ly enacted by the end of the reporting period in the countries in IAS 12. where taxable income has been generated. Conversely, when there is uncertainty over income tax treat- Current income taxes are recognized in profit or loss with the ments, the uncertainty should be reflected in the manner that exception of current income taxes related to items recognized better predicts the resolution of the uncertain tax treatment. outside profit or loss that are recognized in equity. The Group determines whether to consider each uncertain tax treatment separately or together with one or more other uncer- Deferred tax Deferred tax liabilities and assets are calculated on the tempo- tain tax treatments based on which approach provides better predictions of the resolution of the uncertainty. In assessing rary differences between the carrying amounts of assets and whether and how the uncertainty affects the tax treatment, liabilities in the financial statements and their corresponding the Group assumes that a taxation authority will accept or not values recognized for tax purposes on the basis of tax rates in an uncertain tax treatment supposing that the taxation author- effect on the date the temporary difference will reverse, which ity will examine amounts it has a right to examine and have is determined on the basis of tax rates that are enacted or sub- full knowledge of all related information when making those stantively enacted as at the end of the reporting period. examinations. The Group reflects the effect of uncertainty in Deferred tax liabilities are recognized for all taxable temporary accounting for current and deferred tax when it concludes it is differences, except when the deferred tax liability arises from not probable that the taxation authority will accept an uncer- the initial recognition of goodwill or in respect of taxable tem- tain tax treatment, using the expected value or the most likely porary differences associated with investments in subsidiar- amount, whichever method better predicts the resolution of ies, associates and interests in joint arrangements, when the the uncertainty. Group can control the timing of the reversal of the temporary The Group applies significant judgment in identifying uncertain- differences and it is probable that the temporary differences ties over income tax treatments and reassesses any judgments will not reverse in the foreseeable future. and estimates made if a change in facts and circumstances 198 Consolidated Annual Report 2019might change a conclusions about the acceptability of a tax come taxes, the Group presents uncertain tax liabilities/assets treatment or the estimate of the effect of uncertainty, or both. as current tax liabilities/assets or deferred tax liabilities/assets. Since uncertain income tax positions meet the definition of in- 3. New and amended standards and interpretations The Group has applied the following standards, interpreta- cial Instruments” to non-current interests in associates and tions and amendments that took effect as from January 1, joint ventures to which the equity method is not applied. 2019. The application of these amendments did not have a signif- > “IFRS 16 - Leases”, issued on January 2016, which replac- icant impact in the consolidated financial statements. es “IAS 17 - Leases”, “IFRIC 4 - Determining Whether an > “IFRIC 23 - Uncertainty over Income Tax Treatments”, is- Arrangement Contains a Lease”, “SIC 15 - Operating Leas- sued in June 2017; the interpretation clarifies how to apply es-Incentives” and “SIC 27 - Evaluating the Substance of the recognition and measurement requirements in IAS 12 Transactions Involving the Legal Form of a Lease”. when there is uncertainty over income tax treatments. The standard sets out the principles for the recognition, The application of this interpretation did not have a signifi- measurement, presentation and disclosure of leases and cant impact in the consolidated financial statements. requires lessees to account for all leases under a single > “Annual improvements to IFRSs 2015-2017 cycle”, issued in on-balance sheet model similar to the accounting for fi- December 2017; the document contains formal modifica- nance leases under IAS 17. tions and clarifications of existing standards. More specifi- The nature and effect of the changes as a result of the cally, the following standards were amended: adoption of this new accounting standard are described in - “IFRS 3 - Business Combinations”; the amendments note 4 “Changes in accounting policies and disclosures”. clarify that, when an entity obtains control of a business > “Amendments to IAS 19 - Plan Amendment, Curtailment or that is a joint operation, it applies the requirements for Settlement”, issued in February 2018. a business combination achieved in stages, including When an amendment, curtailment or settlement of a de- remeasuring its entire previously held interests in the fined benefit plan occurs during the annual reporting peri- assets of the joint operation at the acquisition-date fair od, the amendments specify that, for the remainder of the value. These amendments apply to business combina- annual reporting period, an entity shall determine: tions for which the acquisition date is on or after Janu- - current service cost using the actuarial assumptions ary 1, 2019; used to remeasure the net defined benefit liability/(as- - “IFRS 11 - Joint Arrangements”; the amendments clari- set); and fy that when an entity obtains joint control of a joint op- - net interest using the net defined benefit liability/(as- eration that constitutes a business (as defined in IFRS set) remeasured and the discount rate used to remeas- 3), it should not remeasure its previously held interests ure the net defined benefit liability/(asset). in that joint operation. These amendments apply to The amendments also clarify that the past service cost transactions in which it obtains joint control on or after (or the gain/loss on settlement) is calculated ignoring the January 1, 2019; effect of the asset ceiling that is determined in a second - “IAS 12 - Income Taxes”; the amendments clarify that step and is recognized in the normal manner in other com- the income tax consequences when the entity recog- prehensive income. The amendments do not address the nizes a liability to pay a dividend are linked more directly accounting for “significant market fluctuations” in the ab- to past transactions or events that generated distribut- sence of a plan amendment, curtailment or settlement. able profits than distributions to owners. Therefore, the The application of these amendments did not have a signif- related income tax consequences of dividends shall be icant impact in the consolidated financial statements. recognized in income statement, other comprehensive > “Amendments to IAS 28 - Long-term Interests in Asso- income or equity according to where the entity original- ciates and Joint Ventures”, issued in October 2017; the ly recognized those past transactions or events; amendments clarify that an entity applies “IFRS 9 - Finan- - “IAS 23 - Borrowing Costs”; the amendments clarify 199 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsthat an entity treats as part of general borrowings any apply to borrowing costs incurred on or after January specific borrowing, originally made to develop a qualify- 1, 2019. ing asset, that remain outstanding when substantially The application of these amendments did not have a signif- all the activities necessary to prepare that asset for its icant impact in the consolidated financial statements. intended use or sale are complete. These amendments 4. Changes in accounting policies and disclosures 4.1 Application of “IFRS 16 - Leases” Transition disclosures The Group adopted “IFRS 16 - Leases” using the modified adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the balance sheet immediately before the date of initial application. Lease liabilities were recognized based on the present val- ue of the remaining lease payments, discounted using the incremental borrowing rate of the Group’s lessee entity as retrospective method, with the date of initial application on of January 1, 2019. January 1, 2019; under this method, the standard is applied The Group used the following practical expedients when ap- retrospectively with the cumulative effect of initial applying plying IFRS 16 to leases previously classified as an operating IFRS 16 recognized at the date of initial application. According- lease under IAS 17: ly, the comparative information (for year 2018) has not been > relied on its assessment of whether leases are onerous restated and it is presented, as previously reported, under IAS applying IAS 37 immediately before the date of initial ap- 17 and related Interpretations. Additionally, the disclosure re- plication and adjusted the right-of-use asset at the date of quirements in IFRS 16 have not been applied to comparative initial application by the amount of any provision for on- information. erous leases recognized immediately before the date of On transition to IFRS 16, the Group elected to use the transi- initial application; tion practical expedient to not reassess whether a contract is, > applied the short-term leases exemption to leases with or contains, a lease, at January 1, 2019. Therefore, the Group lease terms ending within 12 months of the date of initial applied the standard only to contracts that were previously application; identified as leases applying IAS 17 and IFRIC 4 at the date of > applied the low-value assets exemption for contracts initial application. At transition, the Group: whose amounts are considered not material; > used hindsight, particularly to determine the lease term > did not change the carrying amounts of recognized assets for contracts that contain options to extend or terminate and liabilities at the date of initial application for leases pre- a lease. viously classified as finance leases under IAS 17; IFRS 16 affects substantially all of the Group entities that act > recognized right-of-use assets and lease liabilities for as a lessee. The most significant cases affected by the new those leases previously classified as an operating lease provisions of IFRS 16 regard the right-of-use in respect of applying IAS 17, except for leases of low-value assets, buildings, ground rights of renewable energy plants, cars and whose amount is considered not material, for which is other means of transportation (such as shipping) and other not required to make any adjustments on transition. The technical machinery. Group mainly recognized a right-of-use asset at the date of The Group is not required to make any adjustments on transi- initial application in an amount equal to the lease liability, tion for leases in which it acts as a lessor. 200 Consolidated Annual Report 2019Millions of euro ASSETS Non-current assets Property, plant and equipment Investment property Intangible assets Goodwill Deferred tax assets Equity investments accounted for using the equity method Derivatives Non-current contract assets Other non-current financial assets Other non-current assets Current assets Inventories Trade receivables Current contract assets Income tax credits Derivatives Other current financial assets Other current assets Cash and cash equivalents Assets classified as held for sale TOTAL ASSETS at Dec. 31, 2018 IFRS 16 effect at Jan. 1, 2019 76,631 135 19,014 14,273 8,305 2,099 1,005 346 5,769 1,272 1,370 - - - - - - - - - 78,001 135 19,014 14,273 8,305 2,099 1,005 346 5,769 1,272 [Total] 128,849 1,370 130,219 2,818 13,587 135 660 3,914 5,160 2,983 6,630 35,887 688 165,424 - - - - - - - - - 2 1,372 2,818 13,587 135 660 3,914 5,160 2,983 6,630 35,887 690 166,796 [Total] 201 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsMillions of euro LIABILITIES AND SHAREHOLDERS’ EQUITY at Dec. 31, 2018 IFRS 16 effect at Jan. 1, 2019 Equity attributable to shareholders of the Parent Company Share capital Other reserves Retained earnings/(loss carried forward) Non-controlling interests Total shareholders’ equity Non-current liabilities Long-term borrowings Employee benefits Provisions for risks and charges (non-current portion) Deferred tax liabilities Derivatives Non-current contract liabilities Other non-current liabilities Current liabilities Short-term borrowings Current portion of long-term borrowings Provisions for risks and charges (current portion) Trade payables Income tax payable Derivatives Current contract liabilities Other current financial liabilities Other current liabilities Liabilities included in disposal groups classified as held for sale Total liabilities TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY [Total] Millions of euro Total costs (1) Operating income Financial expense Income before taxes Income taxes Net income for the period (shareholders of the Parent Company and non-controlling interests) [Total] 10,167 1,700 19,853 31,720 16,132 47,852 - - - - - - 10,167 1,700 19,853 31,720 16,132 47,852 48,983 1,311 50,294 3,187 5,181 8,650 2,609 6,306 1,901 - - - - - - 3,187 5,181 8,650 2,609 6,306 1,901 [Total] 76,817 1,311 78,128 3,616 3,367 1,312 13,387 333 4,343 1,095 788 12,107 40,348 407 117,572 165,424 - 59 - - - - - - - 59 2 1,372 1,372 3,616 3,426 1,312 13,387 333 4,343 1,095 788 12,107 40,407 409 118,944 166,796 2019 IFRS 16 effect (21) 21 54 (33) (9) (24) (1) The figure reflects a decrease of €224 million in costs for services, leases and rentals and an increase of €203 million in depreciation and amortization. 202 Consolidated Annual Report 2019IFRS 16 reconciliation Millions of euro Minimum payments due in respect of operating leases at Dec. 31, 2018 (Discounting effect) (Low-value lease exemption) (Shot-term lease exemption) Finance lease liabilities at Dec. 31, 2018 Payments due in respect of leases for renewal periods not included in operating lease commitments at Dec. 31, 2018 Lease liabilities at Jan. 1, 2019 2,441 (1,051) (1) (19) 657 - 2,027 4.2 Argentina - Hyperinflationary economy: impact of the application of IAS 29 As from July 1, 2018, the Argentine economy has been con- sidered hyperinflationary based on the criteria established by “IAS 29 - Financial Reporting in Hyperinflationary Econo- mies”. This designation is determined following an assess- ment of a series of qualitative and quantitative circumstanc- es, including the presence of a cumulative inflation rate of In order to also take account of the impact of hyperinfla- tion on the exchange rate of the local currency, the income statement balances expressed in the hyperinflationary cur- rency have been translated into the Group’s presentation currency (euro) applying, in accordance with IAS 21, the closing exchange rate rather than the average rate for the period in order to adjust these amounts to current values. The cumulative changes in the general price indices at De- cember 31, 2018 and December 31, 2019 are shown in the more than 100% over the previous three years. following table: For the purposes of preparing the consolidated financial statements and in accordance with IAS 29, certain items of the balance sheets of the investees in Argentina have been remeasured by applying the general consumer price index to historical data in order to reflect changes in the purchas- ing power of the Argentine peso at the reporting date for those companies. Bearing in mind that the Enel Group acquired control of the Argentine companies on June 25, 2009, the remeasurement of the non-monetary balance-sheet figures was conducted by applying the inflation indices starting from that date. In addition to being already reflected in the opening balance sheet, the accounting effects of that remeasurement also include changes during the period. More specifically, the effect of the remeasurement of non-monetary items, the components of equity and the components of the income statement recognized in 2019 was recognized in a specific line of the income statement under financial income and expense. The associated tax effect was recognized in taxes for the period. Periods From July 1, 2009 to December 31, 2018 From January 1, 2019 to December 31, 2019 Cumulative change in general consumer price index 346.30% 54.46% In 2019, the application of IAS 29 generated net financial in- come (gross of tax) of €95 million. The following tables report the effects of IAS 29 on the bal- ance at December 31, 2019 and the impact of hyperinflation on the main income statement items for 2019, differentiating between that concerning the revaluation on the basis of the general consumer price index and that due to the application of the closing exchange rate rather than the average exchange rate for the period in accordance with the provisions of IAS 21 for hyperinflationary economies. 203 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsMillions of euro Total assets Total liabilities Shareholders’ equity Cumulative hyperinflation effect at Dec. 31, 2018 Hyperinflation effect for the period Exchange differences Cumulative hyperinflation effect at Dec. 31, 2019 765 197 568 368 38 330 (1) (276) (71) (205) 857 164 693 (1) The figure includes net income for 2019, equal to €56 million. Millions of euro Revenue Costs Operating income Net financial income/(expense) Net income/(expense) from hyperinflation Income before taxes Income taxes Net income for the year (shareholders of the Parent Company and non-controlling interests) Attributable to shareholders of the Parent Company Attributable to non-controlling interests IAS 29 effect IAS 21 effect Total effect 297 306 (1) (9) (4) 95 82 26 56 39 17 (325) (236) (2) (89) (17) - (106) (18) (88) (32) (56) (28) 70 (98) (21) 95 (24) 8 (32) 7 (39) (1) Includes impact on depreciation, amortization and impairment losses of €85 million. (2) Includes impact on depreciation, amortization and impairment losses of €(16) million. 4.3 Application of IFRIC Agenda Decision on transactions on non- financial items with physical delivery within “IFRS 9 - Financial Instruments” Transition disclosures In its Agenda Decision of March 2019, the IFRS Interpretations Committee (IFRIC) clarified the proper recognition of contracts entered into to buy or sell fixed-price non-financial items, ac- counted for at fair value through profit or loss under IFRS 9 and physically settled, including energy commodities. Based on that measure, the Group changed its accounting policy for the year ended December 31, 2019, with no impact on net income or equity. Past practice was based on the recognition in: > “Net income/(expense) from commodity contracts measured at fair value” of changes in the fair value of outstanding deriv- atives as well as of the effects in profit or loss, at the settle- ment date, of the derecognition of derivative assets/liabilities deriving from the fair value measurement of those contracts; > “Revenue from sales and services” and “Electricity, gas and fuel purchases” of revenue and costs on the settlement date. The current treatment of such contracts for non-financial items that do not meet the requirements for the own use exemption envisages recognition: > under “Revenue” of changes in fair value on outstanding sale contracts as well as, at the settlement date, of the revenue together with the effects in profit or loss from the derecognition of assets/liabilities deriving from the fair val- ue measurement of those contracts; > under “Costs”: - of changes in fair value on outstanding purchase con- tracts; and - at the settlement date, of the associated purchase costs as well as the effects in profit or loss from derecognition of assets/liabilities deriving from the fair value measurement of those contracts. Consequently the income statement line “Net income/(ex- pense) from commodity contracts measured at fair value” has been renamed as “Net income/(expense) from commodi- ty risk management”, which currently includes only changes in fair value and settlement effects of energy commodity deriva- tives without physical settlement. 204 Consolidated Annual Report 2019Notes 8.a 8.b [Subtotal] 9.a 9.b 9.c 9.d 9.e 9.f 9.g [Subtotal] 10 11 12 11 12 13 14 Impact on the income statement Millions of euro Revenue Revenue from sales and services Other income Costs Electricity, gas and fuel purchases Services and other materials Personnel Net impairment/(reversals) of trade receivables and other receivables Depreciation, amortization and other impairment losses Other operating expenses Capitalized costs Net income/(expense) from commodity risk management Operating income Financial income from derivatives Other financial income Financial expense from derivatives Other financial expense Net income/(expense) from hyperinflation Share of income/(losses) of equity investments accounted for using the equity method Income before taxes Income taxes Net income from continuing operations Net income from discontinued operations Net income for the year (shareholders of the Parent Company and non-controlling interests) Attributable to shareholders of the Parent Company Attributable to non-controlling interests Basic earnings/(loss) per share attributable to shareholders of the Parent Company (euro) Diluted earnings/(loss) per share attributable to shareholders of the Parent Company (euro) Basic earnings/(loss) per share from continuing operations attributable to shareholders of the Parent Company (euro) Diluted earnings/(loss) per share from continuing operations attributable to shareholders of the Parent Company (euro) 2018 73,134 2,538 75,672 35,728 18,870 4,581 1,096 5,355 2,889 (2,264) 66,255 483 9,900 1,993 1,715 1,532 4,392 168 349 8,201 1,851 6,350 - 6,350 4,789 1,561 0.47 0.47 0.47 0.47 Effect of IFRIC application (97) - (97) 1,536 (464) - - - (1,120) - (48) 49 - - - - - - - - - - - - - - - - - - 2018 73,037 2,538 75,575 37,264 18,406 4,581 1,096 5,355 1,769 (2,264) 66,207 532 9,900 1,993 1,715 1,532 4,392 168 349 8,201 1,851 6,350 - 6,350 4,789 1,561 0.47 0.47 0.47 0.47 205 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsWith regard to the details in notes 8 and 9 on revenue and co- commodities with physical delivery that fall within the scope sts, respectively, the following tables give a breakdown of the of IFRS 9. effects of the application of the interpretation on contracts in Millions of euro Notes Revenue from sales and services Sale of electricity Sale of fuels Sale of environmental certificates Sale of energy commodities under contracts with physical delivery (IFRS 9) Gain/(Loss) on derivatives on sale of commodities with physical delivery Total 8.a 8.a 8.a 8.a 8.a Millions of euro Notes Purchase of electricity, gas and fuel Electricity Gas Total Other materials Other operating expenses Gain/(Loss) on derivatives on sale of commodities with physical delivery Total Net income/(expense) from commodity risk management Total impact of IFRIC application on profit or loss 9.a 9.a 9.b 9.f 10 2018 Effect of IFRIC application 43,110 8,556 497 - - 52,163 (3,832) (7,637) (461) 13,843 (2,010) (97) 2018 Effect of IFRIC application 19,584 12,944 32,528 2,375 218 1,318 1,536 (464) - (1,120) 34,903 483 - (48) 49 - 2018 39,278 919 36 13,843 (2,010) 52,066 2018 19,802 14,262 34,064 1,911 (1,120) 34,855 532 - 5. Restatement of comparative disclosures The figures presented in the comments and tables of the notes ments in accordance with the provisions of IFRS 8. Specifically, to the financial statements are consistent and comparable be- bearing in mind that in 2019 management, understood as the tween 2018 and 2019. highest operational decision-making level for the purpose of Note that in the light of the introduction of the new account- taking decisions on the resources to be allocated to the seg- ing policy for the recognition of contracts for the sale and pur- ment and of measuring and evaluating the results, has begun chase of non-financial items that are accounted for at fair value to report performance by business area, the Group has there- through profit or loss in accordance with IFRS 9 and settled fore adopted the following reporting sectors: with physical delivery, analogous reclassifications of the com- > primary sector: business area; and parative balances for 2018 have been performed to ensure the > secondary sector: geographical area. uniformity and comparability of the figures. These reclassifi- The business area is therefore the main discriminant in the ana- cations had no impact on margins or on shareholders’ equity. lyzes performed and decisions taken by the management of Please see paragraph 4.3 for further details. the Enel Group, and is fully consistent with the internal report- With regard to disclosures for operating segments, beginning ing prepared for these purposes since the results are meas- with the close of the accounts at September 30, 2019, the Enel ured and evaluated first and foremost for each business area Group has changed its primary and secondary reporting seg- and only thereafter are they broken down by country. 206 Consolidated Annual Report 2019The new business structure is organized as follows: Thermal ographical area (now renamed North America and consisting Generation and Trading, Enel Green Power, Infrastructure and of the following countries: United States, Canada and Mexico). Networks, End-user Markets, Enel X, Services and Holding/ In order to ensure full comparability of the figures commented Other. here in the light of the new breakdown of the primary and sec- Finally, it should be noted that with effect from September ondary reporting sectors for IFRS 8 disclosure purposes and of 2019, the Latin America area connected with the Enel Green the reallocation of countries in the Enel Green Power segment, Power business area also includes the countries Panama, the comparative figures for 2018 have been adjusted appropri- Costa Rica, Guatemala, El Salvador and Nicaragua, which had ately. previously been reported in the North and Central America ge- 6. Main changes in the scope of consolidation In the two periods under review, the scope of consolidation 80% of eight special purpose vehicles that own eight plants changed as a result of a number of transactions. in operation or under construction in Mexico. Following the 2018 close of the transaction, Enel Green Power SpA holds 20% of their share capital, meaning that the companies are now accounted for using the equity method; > Disposal, on March 12, 2018, of 86.4% of Erdwärme Ober- > disposal, on October 18, 2018, by Enel Green Power SpA of land GmbH, a company developing geothermal plants the biomass generation plant of Finale Emilia; headquartered in Germany. The total transaction price was > disposal, on December 14, 2018, by Enel Green Power SpA €0.9 million, with a realized capital gain of €1 million; of its wholly owned subsidiary Enel Green Power Uruguay > acquisition, on April 2, 2018, of 33.6% of the minority in- SA, which in turn owns the vehicle Estrellada SA of the 50 terests in Enel Generación Chile, enabling Enel Chile to MW Melowind wind farm at Cerro Largo. increase its stake in Enel Generación Chile to 93.55%. In addition, on that date the merger of the renewables com- pany Enel Green Power Latin America SA into Enel Chile 2019 took effect; > Disposal, on March 1, 2019, of 100% of Mercure Srl, a > acquisition, on April 3, 2018, acting through Enel Green company to which the business unit consisting of the Mer- Power España, of 100% of Parques Eólicos Gestinver SLU cure biomass plant and the related legal relationships had and Parques Eólicos Gestinver Gestión SLU for €57 million, been previously transferred. The price for the transaction of which €15 million of existing debt assumed; was €168 million; > acquisition, on June 7, 2018, by Enel Sudeste of control > acquisition, on March 14, 2019, by Enel Green Power SpA, of the Brazilian distribution company Enel Distribuição São acting through its US renewables subsidiary Enel Green Paulo (formerly Eletropaulo Metropolitana Eletricidade de Power North America (EGPNA, now renamed Enel North São Paulo SA) following initial participation of shareholders. America), of 100% of 13 companies that own seven oper- The tender for 100% of the shares ended on July 4, 2018. ating renewable generation plants from Enel Green Power At September 30, 2018, the company was consolidated on North America Renewable Energy Partners (EGPNA REP), the basis of a 95.88% holding by the Group; a joint venture 50% owned by EGPNA and 50% by General > acquisition, on July 25, 2018, acting through the subsidiary Electric Capital’s Energy Financial Services; Endesa Red, of 94.6% of Empresa de Alumbrado Eléctrico > acquisition, on March 27, 2019, by Enel Green Power SpA de Ceuta SA, a company operating in the distribution and sale (EGP), acting through its US renewables subsidiary EGP- of electricity in the autonomous city of Ceuta in North Africa; NA (now ENA), of Tradewind Energy, a renewable energy > disposal, on September 28, 2018, to Caisse de Dépôt et project development company based in Lenexa, Kansas. Placement du Québec (CDPQ), a long-term institutional in- EGP has incorporated the entire Tradewind development vestor, and CKD Infraestructura México SA de CV (CKD IM), platform, which includes 13 GW of wind, solar and storage the investment vehicle of leading Mexican pension funds, of projects located in the United States. The agreement also 207 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsprovided for the sale, which took place in June, of Savion, ropaulo Metropolitana Eletricidade de São Paulo SA for a wholly owned subsidiary of Tradewind; about €93 million; > acquisition, on April 30, 2019, by Enel X Italia of 100% of > on December 5, 2019, Enel SpA increased its stake in Enel YouSave SpA, an Italian company operating in the energy Chile by 0.11% under the provisions of two share swap services sector, providing assistance to large electricity transactions with a financial institution to increase its inter- consumers; est in Enel Chile SA by a maximum of 3% of share capital. > on May 31, 2019, the finalization, acting through the re- newables subsidiary Enel Green Power Brasil Participações Ltda, of the disposal of 100% of three renewables plants in Brazil. The total price of the transaction was about R$2.7 billion, the equivalent of about €603 million; > acquisition, on November 14, 2019, by Enel X Srl of 55% of PayTipper, an authorized payment institution that offers its customers financial services to facilitate their daily lives. The contract is accompanied by a put option for the re- maining 45%. Other changes In addition to the above changes in the scope of consolida- tion, note the following transactions, which although they do not represent transactions involving the acquisition or loss of control, gave rise to a change in the interest held by the Group in the investees: > Enel SpA increased its stake over the course of 2019 in Acquisition of geothermal, solar and wind plants from Enel Green Power North America Renewable Energy Partners On March 14, 2019, Enel Green Power SpA, acting through its US subsidiary Enel Green Power North America (EGPNA, now called Enel North America), acquired 100% of 13 com- panies owning seven operating renewable generation plants with a total capacity of 650 GW from Enel Green Power North America Renewable Energy Partners (EGPNA REP), a joint venture 50% owned by EGPNA (now ENA) and 50% by General Electric Capital’s Energy Financial Services. The acquisition involved a cash outflow of €225 million, of which €198 million for the equity acquired and €27 million for the settlement with the counterparty of a number of creditor positions that the latter had in respect of the companies ac- Enel Américas by 5.74% under the provisions of the two quired. share swap contracts signed with a financial institution and as a result of a non-proportional capital increase in the sub- sidiary, bringing the Group’s interest to 59.97%; > on March 25, 2019, Enel X International acquired 40% of EnerNOC Japan K.K, bringing its stake to 100%; > on September 5, 2019, Enel Green Power Development acquired 23.44% of Enel Green Power India, bringing its interest to 100%; > on November 21, 2019, Enel Brasil acquired 4.1% of Elet- The 13 companies included in the transaction own the follow- ing seven plants: Cove Fort, Salt Wells, Stillwater (two plants), Cimarron Bend, Lindahl, Sheldon Springs. The transaction involved the provisional recognition of nega- tive goodwill of €106 million and the concomitant recognition of a loss by EGPNA REP, which is accounted for using the eq- uity method, reflecting the capital loss (€88 million pertaining to EGPNA) on the sale of the 13 companies to EGPNA. 208 Consolidated Annual Report 2019The following table reports the provisional fair values of the net assets acquired. Millions of euro Property, plant and equipment Intangible assets Goodwill Investments accounted for using the equity method Inventories Trade receivables Other current assets Cash and cash equivalents Borrowings Provisions for risks and charges (non-current portion) Deferred tax liabilities Other non-current liabilities Short-term borrowings Current portion of long-term borrowings Trade payables Other current liabilities Non-controlling interests Net assets acquired Cost of the acquisition (of which paid in cash) Goodwill/(Badwill) Carrying amount prior to March 14, 2019 Adjustments from purchase price allocation Carrying amount at March 14, 2019 947 20 13 (10) 2 6 7 6 (579) (9) - (2) (2) (41) (8) (2) - 348 225 225 (123) 86 (20) (13) - - - - - (24) 7 (56) (5) - 8 - - - (17) - - 17 1,033 - - (10) 2 6 7 6 (603) (2) (56) (7) (2) (33) (8) (2) - 331 225 225 (106) The companies acquired contributed €112 million in revenue Under the terms of the agreement, Savion, a 100% subsidi- and €41 million in operating income to results for 2019. ary of Tradewind, which has a 6 GW development platform of Acquisition of Tradewind Energy solar and storage projects, would be sold to the Green Invest- ment Group, part of the Australian multinational Macquarie, and the Cheyenne Ridge company would be sold to Xcel. At On March 27, 2019, Enel Green Power acquired Tradewind June 30, 2019, those disposals had been finalized. Definitive Energy, a renewables project development company with 13 regulatory approval of the disposal of Savion was obtained in GW of wind, solar and storage projects located in the United July 2019. States. 209 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsThe following table reports the provisional fair values of the net assets acquired. Millions of euro Property, plant and equipment Intangible assets Deferred tax assets Other non-current assets Trade receivables Other current assets Cash and cash equivalents Deferred tax liabilities Other non-current liabilities Short-term borrowings Trade payables Other current financial liabilities Other current liabilities Net assets acquired Cost of the acquisition (of which paid in cash) Goodwill/(Badwill) Carrying amount prior to March 27, 2019 Adjustments from purchase price allocation Carrying amount at March 27, 2019 8 2 11 31 3 1 4 - (1) (87) (6) (54) (3) (91) 6 6 97 (2) 100 (11) 3 (3) 117 - (26) - - (4) 25 (2) 197 25 25 (172) 6 102 - 34 - 118 4 (26) (1) (87) (10) (29) (5) 106 31 31 (75) The accounting effects of the transaction involved the reco- The total consideration, equal to €29 million, based on the gnition of negative goodwill of €75 million. During the year, structure of the operation, was divided as follows: the process of allocating the purchase price was comple- > price at the date the agreement was signed, equal to €20 ted by independent experts, who allocated the portfolio of million; projects under development to “intangible assets”. Those no > a final price adjustment of €9 million. longer considered strategic and subsequently sold were reco- gnized under “other current assets”. The acquisition involved a cash outlay of €26 million, including Acquisition of YouSave the payment of €3 million into an escrow account. This residual amount of €3 million represents a deferred com- ponent to be paid on the 18th month from the execution date, On April 30, 2019, Enel X Italia acquired 100% of YouSave unless the conditions for the payment of the indemnity by the SpA, an Italian company that operates in the energy services seller to the buyer with respect to a dispute pending before sector, providing assistance to large energy consumers in the the Court of Bergamo should exist. industrial, services and government sectors with the aim of significantly reducing energy expenditure by jointly improving The following table reports the provisional fair values of the prices and the amount of power consumed. net assets acquired. Carrying amount prior to April 30, 2019 Adjustments from purchase price allocation Post-adjustment carrying amount at April 30, 2019 15 29 14 24 - (24) 39 29 (10) Millions of euro Net assets acquired Cost of the acquisition Goodwill/(Badwill) 210 Consolidated Annual Report 2019Acquisition of PayTipper is associated with a put option for the remaining 45%, to be exercised no later than April 30, 2024. At December 31, 2019 On November 14, 2019, Enel X acquired 55% of PayTipper, the put option had a value of €17 million. a payment institution with agreements with an extensive The Group will determine the fair value of the assets acquired network of sales outlets that offers its customers financial and the liabilities assumed within 12 months of the acquisi- services to facilitate their daily lives. In addition, the contract tion date. Determination of goodwill Millions of euro Net assets acquired Cost of the acquisition (of which paid in cash) Goodwill 4 22 5 18 Disposal of three renewables plants in Brazil ables subsidiary Enel Green Power Brasil Participações Ltda. The total consideration in the transaction, paid to Enel at closing, was equal to the enterprise value of the plants and On May 31, 2019 the disposal of 100% of three operating amounted to about R$2.7 billion, equivalent to about €603 renewables plants in Brazil was finalized through the renew- million. Millions of euro Value of the transaction Net assets sold Transaction costs Reversal of OCI reserve Capital loss 603 (565) (4) (41) (7) Disposal of Mercure Srl the Mercure biomass power plant and related legal relation- ships had previously been transferred. The price for the sale March 1, 2019, saw the finalization of the sale of 100% of Mercure Srl, a company to which a business unit consisting of was €168 million. Millions of euro Value of the transaction Net assets sold Capital gain 168 60 108 211 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements 7. Segment information The representation of performance and financial position by and of the reallocation of countries in the Enel Green Power business area presented here is based on the approach used segment, the comparative figures for 2018 have been restat- by management in monitoring Group performance for the two ed appropriately. At the same time, within each CGU, lower periods being compared. level operating units were identified at the intersections of the As already discussed in note 5 to the consolidated financial organizational matrix (Business Line/Country/Region), which statements, since September 2019, segment information has in accordance with IAS 36 made it possible to reallocate the been reformulated to give a more consistent view of the deci- goodwill associated with the higher level and reported cumula- sion-making processes implemented by management, which tively at December 31, 2018 in the column “Other, eliminations give priority to analyzes by Business Line rather than by Coun- and adjustments”. try or Region. In order to ensure full comparability of the figures comment- For more information on performance and financial develop- ed here in the light of the new breakdown of the primary and ments during the year, please see the dedicated section in the secondary reporting sectors for IFRS 8 disclosure purposes Report on Operations. 212 Consolidated Annual Report 2019Segment information for 2019 and 2018 Results for 2019 (1) Millions of euro Revenue and other income from third parties Revenue and other income from transactions with other segments Total revenue Total costs Net income/(expense) from commodity risk management Depreciation and amortization Impairment losses Reversals of impairment losses Operating income Capital expenditure Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Other, eliminations and adjustments Total 30,519 7,360 20,092 19,482 967 1,901 6 80,327 1,532 373 1,697 13,062 163 80 (16,907) - 32,051 29,980 (676) 1,142 4,031 (284) 7,733 3,143 14 99 (12) (3,494) 3,276 851 4,293 (2) 21,789 32,544 1,130 13,511 29,186 972 1,981 1,855 (16,901) (16,757) 80,327 61,890 - 371 (62) 5,277 3,905 (71) 333 930 (139) 2,163 449 - 145 111 - (98) 270 - 171 33 (3) (75) 134 - 26 1 - (171) 45 (733) 5,750 5,576 (500) 6,878 9,947 1,241 2,692 (1) Segment revenue includes both revenue from third parties and revenue flows between the segments. An analogous approach was taken for other income and costs for the period. (2) Does not include €4 million regarding units classified as “held for sale”. Results for 2018 (1) (2) (3) Millions of euro Revenue and other income from third parties Revenue and other income from transactions with other segments Total revenue Total costs Net income/(expense) from commodity risk management Depreciation and amortization Impairment losses Reversals of impairment losses Operating income Capital expenditure Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Other, eliminations and adjustments Total 26,630 7,613 18,250 20,340 849 1,878 15 75,575 977 443 1,718 13,431 157 60 (16,786) - 27,607 27,130 8,056 3,286 19,968 33,771 1,006 12,429 30,681 882 1,938 1,918 (16,771) 75,575 (16,570) 59,756 640 (162) 1,098 158 (21) 1,101 131 (129) (118) 3,505 839 2,784 (4) - 2,483 337 (68) 4,787 3,830 (11) 314 1,000 (193) 1,958 374 - 86 15 4 19 183 65 113 15 (5) (38) 106 - 19 1 (8) (213) 36 532 5,214 1,657 (420) 9,900 8,152 (1) Segment revenue includes both revenue from third parties and revenue flows between the segments. An analogous approach was taken for other income and costs for the period. (2) The figures have been restated to ensure comparability with results for 2019, which are presented using business area as the primary reporting segment. (3) The 2018 figures have been adjusted to take account of the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) contained in the Agenda Decision of March 2019, which involved changes in the classification, with no impact on margins, of the effects of purchase and sales contracts for commodities measured at fair value through profit or loss (for more details, see note 4.3 of the consolidated financial statements). (4) Does not include €378 million regarding units classified as “held for sale”. 213 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsFinancial position by segment At December 31, 2019 Millions of euro Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Property, plant and equipment 11,863 30,351 36,333 160 Intangible assets 134 4,697 23,782 3,624 Non-current and current contract assets Trade receivables Other Operating assets - 3,219 1,426 - 1,726 1,421 482 - 7,649 3,838 1,654 543 16,642 (1) 38,195 (2) 69,900 (3) 8,165 Trade payables 3,383 2,192 Non-current and current contract liabilities Sundry provisions Other Operating liabilities 199 3,410 1,074 8,066 167 903 1,843 5,105 5,411 7,271 4,412 8,867 25,961 (4) 5,028 75 494 2,642 8,239 442 605 53 607 1,098 2,805 414 5 34 415 868 663 466 75 676 1,283 3,163 949 16 578 1,451 2,994 Other, eliminations and adjustments 11 29 43 Total 79,823 33,337 653 (4,632) 13,083 (1,350) 6,075 (5,899) 132,971 (4,417) 12,960 (104) 7,629 459 10,290 (503) 15,789 (4,565) 46,668 (1) Of which €4 million regarding units classified as “held for sale”. (2) Of which €7 million regarding units classified as “held for sale”. (3) Of which €10 million regarding units classified as “held for sale”. (4) Of which €3 million regarding units classified as “held for sale”. At December 31, 2018 (1) Millions of euro Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Property, plant and equipment 15,448 25,971 35,026 73 Intangible assets (2) Non-current and current contract assets Trade receivables Other Operating assets 38 15 4,345 2,483 1,220 - 1,290 1,042 15,875 1,078 348 - 7,582 4,640 2,424 555 22,329 (3) 29,523 (4) 61,255 (5) 6,346 1,133 344 347 47 282 113 Trade payables 4,680 1,806 5,555 5,535 Non-current and current contract liabilities Sundry provisions Other Operating liabilities 220 2,490 1,647 100 768 1,517 7,156 4,644 6,746 9,037 4,191 (7) 24,101 (8) 41 551 2,454 8,581 381 13 35 257 686 Other, eliminations and adjustments 10 Total 77,243 14,343 33,315 (7) 481 (5,224) 13,611 (1,985) 6,358 7,137 (6) 131,008 (5,458) 13,389 (141) 524 7,401 9,681 (998) 12,934 (6,073) 43,405 371 414 78 696 1,726 3,285 890 12 669 1,311 2,882 (1) The figures have been restated to ensure comparability with the results at December 31, 2019, which are presented using business area as the primary reporting segment. (2) Intangible assets include goodwill allocated by country, which was reallocated by business area in 2019 in the light of new breakdown of primary and se- condary reporting segments for the purpose of IFRS 8 disclosures. (3) Of which €4 million regarding units classified as “held for sale”. (4) Of which €635 million regarding units classified as “held for sale”. (5) Of which €5 million regarding units classified as “held for sale”. (6) Of which €23 million regarding units classified as “held for sale”. (7) Of which €19 million regarding units classified as “held for sale”. (8) Of which €3 million regarding units classified as “held for sale”. 214 Consolidated Annual Report 2019The following table reconciles segment assets and liabilities and the consolidated figures. Millions of euro Total assets Equity investments accounted for using the equity method Non-current derivative assets Other non-current financial assets Long-term tax receivables included in “Other non-current assets” Current financial assets Current derivative assets Cash and cash equivalents Deferred tax assets Tax receivables Financial and tax assets of “Assets held for sale” Segment assets Total liabilities Long-term borrowings Non-current derivative liabilities Short-term borrowings Current portion of long-term borrowings Current financial liabilities Current derivative liabilities Deferred tax liabilities Income tax payable Other tax payables Financial and tax liabilities of “Liabilities held for sale” Segment liabilities at Dec. 31, 2019 171,426 at Dec. 31, 2018 165,424 1,682 1,383 6,006 1,587 4,305 4,065 9,029 9,112 1,206 80 132,971 124,488 54,174 2,407 3,917 3,409 754 3,554 8,314 209 1,082 - 46,668 2,099 1,005 5,769 231 5,160 3,914 6,630 8,305 1,282 21 131,008 117,572 48,983 2,609 3,616 3,367 788 4,343 8,650 333 1,093 385 43,405 215 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsRevenue 8.a Revenue from sales and services - €77,366 million Millions of euro Sale of electricity (1) Transport of electricity Fees from network operators Transfers from institutional market operators Sale of gas Transport of gas Sale of fuels (1) Connection fees to electricity and gas networks Construction contracts Sale of environmental certificates (1) Sale of value-added services Other sales and services Total IFRS 15 revenue Operating leases Sale of energy commodities under contracts with physical delivery (IFRS 9) (1) Gain/(Loss) on derivatives on sale of commodities with physical delivery (1) Reinsurance premiums Other revenue 2019 40,045 10,470 866 1,625 3,294 617 914 785 749 36 343 1,295 61,039 24 10,775 5,519 6 3 2018 39,278 10,101 1,012 1,711 4,401 576 919 714 735 36 390 1,305 61,178 26 13,843 (2,010) - - Change 767 369 (146) (86) (1,107) 41 (5) 71 14 - (47) (10) (139) (2) (3,068) 7,529 6 3 2.0% 3.7% -14.4% -5.0% -25.2% 7.1% -0.5% 9.9% 1.9% - -12.1% -0.8% -0.2% -7.7% -22.2% - - - TOTAL REVENUE FROM SALES AND SERVICES 77,366 73,037 4,329 5.9% (1) The 2018 figures have been adjusted to take account of the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) contained in the Agenda Decision of March 2019, which involved changes in the classification, with no impact on margins, of the effects of purchase and sales contracts for commodities measured at fair value through profit or loss (for more details, see note 4.3 of the consolidated financial statements). The increase in revenue from energy sales (€767 million) is Revenue from the sale of natural gas for 2019, which totaled mainly attributable to the consolidation of Enel Distribuição São €3,294 million, decreased by €1,107 million from the previous Paulo in June 2018. year (€4,401 million in 2018). The decrease reflects lower quan- tities sold and, above all, lower average prices applied for sales Revenue from the transport of electricity came to €10,470 mil- in Spain (€1,136 million) compared with the previous year. lion in 2019, an increase of €369 million. This increase was mainly due to the acquisition of Enel Distribuição São Paulo Other non-IFRS 15 revenue increased by €4,468 million due to and the greater distribution revenue in Italy, above all as a re- the sale of commodities under contracts for physical delivery sult of the regulatory change with Resolution no. 654/2015 of and adjustments to their fair value, including for the unsettled the Regulatory Authority for Energy, Networks and the Envi- portion following reclassification as a result of application of the ronment (ARERA) (related to “regulatory lag”). IFRIC Agenda Decision of March 2019 concerning the recogni- tion of contracts on commodities with the physical delivery of Revenue generated by fees from network operators came to energy within the scope of IFRS 9. €866 million, a decrease of €146 million compared with the previous year due, above all, to lower fees for the remuneration Revenue from contracts with customers (IFRS 15) for 2019 of generation plants in Italy. totaled €61,039 million and can be broken down into point-in- time and over-time revenue as shown in the table below: 216 Consolidated Annual Report 2019Millions of euro Total IFRS 15 revenue 2019 Europe and Euro- Mediterranean Italy Point in time Iberia Latin America Point Over Point in time time in time Over time Over time Over time Affairs North America Point in time Point in time Over time Other, eliminations and adjustments Point Over in time time Africa, Asia and Oceania Point Over in time time Total Point in time Over time 22,635 522 17,860 785 15,573 503 1,383 934 646 27 76 81 7 7 58,180 2,859 The table below gives a breakdown of revenue from sales and services by geographical area: Millions of euro Italy (1) Europe Iberia (1) France Switzerland Germany Austria Slovenia Slovakia Romania Greece Bulgaria Belgium Czech Republic Hungary Russia Netherlands United Kingdom Other European countries Americas United States Canada Mexico (1) Brazil Chile Peru Colombia Argentina Other South American countries Other Africa Asia Total 2019 26,420 18,265 1,259 217 3,746 173 40 1 1,311 73 8 26 152 418 897 6,553 726 (23) 501 18 233 7,752 3,263 1,261 2,243 1,323 169 92 249 77,366 2018 27,385 18,379 1,006 1,039 2,297 155 27 - 1,214 62 9 320 113 399 989 2,139 1,685 113 466 23 519 6,518 3,169 1,275 2,242 1,265 14 82 133 73,037 (1) The 2018 figures have been adjusted to take account of the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) contained in the Agenda Decision of March 2019, which involved changes in the classification, with no impact on margins, of the effects of purchase and sales contracts for commodities measured at fair value through profit or loss (for more details, see note 4.3 of the consolidated financial statements). 217 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsPerformance obligations The following table provides information about the Group’s performance obligations arising from contracts with custo- mers with reference to the main revenue streams only, with a summary of the specific judgments made and the related revenue recognition policies: Type of product/service Nature and timing of satisfaction of performance obligation Accounting policies Revenue from the sale and transport of electricity/ gas to end users is recognized when these commodities are delivered to the customer and is based on the quantities provided during the period, even if these have not yet been invoiced. It is determined using estimates as well as periodic meter readings. Where applicable, this revenue is based on the rates and related restrictions established by law or by the Regulatory Authority for Energy, Networks and the Environment (ARERA) and analogous foreign authorities during the applicable period. Sale/transport electricity/gas to end- users An electricity/gas supply agreement signed with an end users includes a single performance obligation (sale and transport of the commodity) because the Group has determined that the contract does not provide distinct goods/services and the promise is satisfied by transferring control over the commodity to the customer when it is delivered at the point of delivery. In order to determine the nature of the promise included in such contracts, the Group carefully analyzes the facts and circumstances applicable to each contract and commodity. However, the Group considers that the performance obligation provided for in a repetitive service contract, such as a supply or transport contract for the provision of electricity/gas to end users is typically satisfied over time (because the customer simultaneously receives and consumes the benefits of the commodity as it is delivered) as part of a series of distinct goods/services (i.e., each unit of commodity) that are substantially the same and have the same pattern of transfer to the customer. In these cases, the Group applies an output method to recognize revenue in the amount to which it has a right to invoice the customer if that amount corresponds directly with the value to the customer of the performance completed to date. 218 Consolidated Annual Report 2019Type of product/service Nature and timing of satisfaction of performance obligation Accounting policies The network connection fees received from customers for connecting them to the electricity/ gas distribution networks require a specific Group assessment to take into consideration all terms and conditions of the connection arrangements. This assessment is intended to determine whether the contract includes other distinct goods or services, such as for example, the right to obtain ongoing access to the infrastructure in order to receive the commodity or, when the connection fee is a “non-refundable up-front fee” paid at or near contract inception, a material right that gives rise to a performance obligation. In particular, in some countries in which the Group operates, it has determined that the nature of the consideration received represents a “non-refundable up-front fee” whose payment provides a material right to the customer. In order to determine if the period over which this material right should be recognized extends beyond the initial contractual period, the Group takes into consideration the applicable local legal and regulatory framework applicable to the contract and that affect the parties. In such cases, if there is an implied assignment of the material right and an obligation from the initial customer to the new customer, the Group recognizes the connection fee over a period beyond the relationship with the initial customer, considering the concession terms as the period during which the initial customer and any future customer can benefit from the ongoing access without paying an additional connection fee. As a consequence, the fee is recognized over the period for which the payment creates an obligation for the Group to make the lower prices available to future customers (i.e., the period during which the customer is expected to benefit from the ongoing access service without having to pay an “up-front fee” upon renewal). The construction contracts typically include a performance obligation satisfied over time. For these contracts, the Group generally considers it appropriate to use an input method for measuring progress, except when a specific contract analysis suggests the use of an alternative method that better depicts the Group’s performance obligation fulfilled at reporting date. Network connection services Construction contracts Revenue from monetary and in-kind fees for connection to the electricity and gas distribution network is recognized on the basis of the satisfaction of the performance obligations included in the contract. The identification of distinct goods or services requires a careful analysis of the terms and conditions of the connection arrangements, which could vary from country to country based on the local context, regulations and law. In order to finalize this assessment, the Group considers not only the characteristics of the goods/services themselves (i.e., the good or service is capable of being distinct) but also the implied promises for which the customer has a valid expectation as it views those promises as part of the negotiated exchange, that is goods/services that the customer expects to receive and has paid for (i.e., the promise to transfer the good or service to the customer is separately identifiable from other promises in the contract). Furthermore, the Group acts as an agent in some contracts for electricity/gas network connection services and other related activities, depending on local legal and regulatory framework. In such cases, it recognizes revenue on a net basis, corresponding to any fee or commission to which it expects to be entitled. For construction contracts that include a performance obligation satisfied over time, the Group recognizes revenue over time by measuring progress toward the complete satisfaction of that performance obligation. The cost-incurred method (cost-to-cost method) is generally considered the best method to depict the Group’s performance obligation fulfilled at the reporting date. The amount due from customers under a construction contract is presented as a contract asset; the amount due to customers under a construction contract is presented as a contract liability. 219 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements8.b Other income - €2,961 million Millions of euro Operating grants Grants for environmental certificates Capital grants (electricity and gas business) Sundry reimbursements Gains on disposal of subsidiaries, associates, joint ventures, joint operations and non-current assets held for sale Gains on the disposal of property, plant and equipment, and intangible assets Service continuity bonuses Other income Total 2019 2018 Change 19 475 25 521 325 79 32 1,485 2,961 20 664 22 353 287 61 44 1,087 2,538 (1) (189) 3 168 38 18 (12) 398 423 -5.0% -28.5% 13.6% 47.6% 13.2% 29.5% -27.3% 36.6% 16.7% Grants for environmental certificates amounted to €475 mil- companies in Mexico at the end of September 2018 and lion, a decrease of €189 million from the previous year due the associated re-measurement at fair value of the 20% essentially to a reduction in grants on energy efficiency cer- stake retained by the Group in the companies sold (€190 tificates obtained on distribution in Italy. million); > the gain on the sale of EF Solare Italia (€65 million); Sundry reimbursements increased by €168 million, attrib- > the gain on the sale of a number of companies within the utable mainly to Enel Generación Chile for the indemnity Enel Green Power Business Line in Uruguay (€18 million). received from the customer Anglo American for early with- drawal from a long-term electricity supply agreement totaling The aggregate “Other income” increased by €398 million in €160 million, of which €80 million related to Thermal Genera- 2019, essentially attributable to: tion and Trading Business Line and €80 million related to the > an increase in revenue in Argentina following the Edesur Enel Green Power Business Line. agreement with the local authorities resolving reciprocal pending issues arising during the 2006-2016 period (€233 Gains on the disposal of entities came to €325 million in million); 2019, an increase of €38 million, and mainly include: > the adjustment to the amount paid for the acquisition of > the gain on the sale of Mercure Srl, a special-purpose ve- eMotorWerks in 2017 in application of certain contract hicle to which Enel Produzione had previously transferred clauses (€98 million); the Valle del Mercure biomass plant (€108 million); > the €50 million payment under the agreement that e-dis- > the negative goodwill (of €181 million) resulting from the tribuzione reached with F2i and 2i Rete Gas for the early, definitive allocation of the purchase price of (i) a number lump-sum settlement of the second indemnity connected of companies sold by Enel Green Power North Ameri- with the sale, in 2009, of e-distribuzione’s share held in ca Renewable Energy Partners LLC (€106 million) and (ii) Enel Rete Gas. Tradewind, which transitioned from being an associated company to a wholly-owned subsidiary (negative goodwill In 2018, this aggregate mainly included the €128 million in- of €75 million); demnity related to the e-distribuzione agreement for the sale > the gains of €42 million on the disposals of Gratiot and of Enel Rete Gas in 2009. Outlaw, two renewable energy projects developed by Tradewind. The following table shows a breakdown of total revenue from sales and services by business area based on the approach In 2018, this item mainly included: used by management to monitor the Group’s performance > the gain on the sale, with loss of control, of eight project during the two years being compared. 220 Consolidated Annual Report 2019Millions of euro 2019 Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Other, eliminations and adjustments Total 31,744 307 32,051 7,173 560 7,733 20,599 32,042 1,011 1,946 (17,149) 77,366 1,190 21,789 502 32,544 2018 (1) 119 35 248 2,961 1,130 1,981 (16,901) 80,327 27,412 7,650 18,805 33,444 195 27,607 406 8,056 1,163 19,968 327 33,771 1,006 964 42 1,958 (20) 1,938 (17,196) 73,037 425 2,538 (16,771) 75,575 Revenue from sales and services Other income Total revenue Revenue from sales and services Other income Total revenue (1) The 2018 figures have been adjusted to take account of the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) contained in the Agenda Decision of March 2019, which involved changes in the classification, with no impact on margins, of the effects of purchase and sales contracts for commodities measured at fair value through profit or loss (for more details, see note 4.3 of the consolidated financial statements). 221 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsCosts 9.a Electricity, gas and fuel purchases - €33,755 million Millions of euro Electricity (1) Gas (1) Nuclear fuel Other fuels Total 2019 20,449 10,706 125 2,475 33,755 2018 19,802 14,262 118 3,082 37,264 Change 647 (3,556) 7 (607) (3,509) 3.3% -24.9% 5.9% -19.7% -9.4% (1) The 2018 figures have been adjusted to take account of the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) contained in the Agenda Decision of March 2019, which involved changes in the classification, with no impact on margins, of the effects of purchase and sales contracts for commodities measured at fair value through profit or loss (for more details, see note 4.3 of the consolidated financial statements). Purchases of electricity, gas and other fuels decreased by see paragraph 4.3 of the notes to the consolidated financial €3,509 million in 2019 mainly due to the reclassifications in re- statements. sponse to the IFRIC Agenda Decision of March 2019 concern- This reduction, under “fuels”, also includes the €206 million ing the recognition of non-financial transactions for physical in impairment losses on fuel inventories associated with the deliveries within the scope of IFRS 9. For more information, coal-fired plants subject to impairment in Italy and Spain. 9.b Services and other materials - €18,580 million Millions of euro Transmission and transport Maintenance and repairs Telephone and postal costs Communication services IT services Leases and rentals Other services Other materials (1) Total 2019 9,879 1,145 181 142 806 382 3,935 2,110 18,580 2018 9,754 1,013 180 129 773 589 4,057 1,911 18,406 Change 1.3% 13.0% 0.6% 10.1% 4.3% -35.1% -3.0% 10.4% 0.9% 125 132 1 13 33 (207) (122) 199 174 (1) The 2018 figures have been adjusted to take account of the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) contained in the Agenda Decision of March 2019, which involved changes in the classification, with no impact on margins, of the effects of purchase and sales contracts for commodities measured at fair value through profit or loss (for more details, see note 4.3 of the consolidated financial statements). Costs for services and other materials amounted to €18,580 the impairment of spare-parts inventories associated with the million in 2019, an increase on 2018 of €174 million. This incre- coal-fired plants subject to impairment in Italy and Spain for a ase is mainly attributable to “Other materials”, which includes total of €102 million. 222 Consolidated Annual Report 20199.c Personnel - €4,634 million Millions of euro Wages and salaries Social security contributions Deferred compensation benefits Other post-employment and long-term benefits Early retirement incentives Other costs Total 2019 3,240 875 103 108 101 207 2018 3,157 894 103 113 138 176 4,634 4,581 Change 83 (19) - (5) (37) 31 53 2.6% -2.1% - -4.4% -26.8% 17.6% 1.2% Personnel costs amounted to €4,634 million in 2019, an in- the total workforce essentially reflects the greater average crease of €53 million. size of the workforce in 2019 due to the consolidation of Enel The Group’s workforce decreased by 1,019 employees, main- Distribuição São Paulo, which only took effect as from June ly reflecting the negative difference between new hires and 2018. terminations (1,094 employees) due to early-retirement in- Early retirement incentives in 2019 totaled €101 million, a de- centives, only partially offset by a net increase for changes crease of €37 million mainly attributable to Latin America and in the scope of consolidation (75 employees) essentially at- Italy in reflection of terminations of employment in application tributable to: of the provisions of Article 4 of Law 92/2012 (the “Fornero > the disposal of the Mercure plant by Enel Produzione in Act”) applied mainly in 2018, which were only partially offset Italy; by the cost increase in Spain for the Plan de Salida incentive > the acquisition of Tradewind in the USA; plan. > the sale of the Reftinskaya GRES plant in Russia; > the acquisition of PayTipper Network Srl, FlagPay Srl, and The table below shows the average number of employees by PayTipper in Italy. category, along with a comparison with the previous year, and the headcount as of December 31, 2019. The increase in wages and salaries despite the decrease in Senior managers Middle managers Office staff Blue collar Total Average (1) Headcount (1) 2018 1,343 10,614 33,906 20,834 66,697 Change at Dec. 31, 2019 32 402 1,160 12 1,606 1,357 11,329 36,280 19,287 68,253 2019 1,375 11,016 35,066 20,846 68,303 (1) For companies consolidated on a proportionate basis, the headcount corresponds to Enel’s percentage share of the total. 223 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements9.d Net impairment/(reversals) of trade receivables and other receivables - €1,144 million Millions of euro Impairment of trade receivables Impairment of other receivables Total impairment of trade and other receivables Reversals of impairment losses on trade receivables Reversals of impairment losses on other receivables Total reversals of impairment losses on trade and other receivables TOTAL NET IMPAIRMENT/(REVERSALS) OF TRADE AND OTHER RECEIVABLES 2019 1,239 116 1,355 (202) (9) (211) 1,144 2018 1,367 18 1,385 (281) (8) (289) 1,096 Change (128) 98 (30) 79 (1) 78 48 -9.4% - -2.2% - - - 4.4% The aggregate, which totaled €1,144 million, includes impair- by the increased impairment resulting from the consolidation ment losses and reversals of impairment losses on trade and of Enel Distribuição São Paulo and by a decrease in reversals other receivables. The decrease in impairment for Italian com- of impairment for Endesa Energía. panies operating in end-user markets was more than offset 9.e Depreciation, amortization and other impairment losses - €9,682 million Millions of euro Property, plant and equipment Investment property Intangible assets Other impairment losses Other reversals of impairment losses Total 2019 4,481 3 1,266 4,221 (289) 9,682 2018 4,132 7 1,075 272 (131) 5,355 Change 349 (4) 191 3,949 (158) 4,327 8.4% -57.1% 17.8% - - 80.8% In 2019, depreciation, amortization and other impairment losses commissioning of the Tarapacá and Bocamina I coal-fired essentially reflect the impairment losses recognized on a num- plants (by May 31, 2020, and December 31, 2023, respec- ber of coal-fired plants in Italy, Spain, Chile and Russia for a total tively) within the scope of the decarbonization process that of €4,010 million, including related decommissioning charges. has begun in the country (€356 million); These impairment losses are essentially attributable to: > the reduced competitiveness of plants with higher CO2 emissions compared with other technologies, particularly in > the adjustment (€127 million) to the fair value of the Reft- inskaya plant as a result of its classification as held for sale following the binding agreement approved by the parties Spain and Italy, based on the changing characteristics of the in June 2019. market in terms of commodity prices and increased com- pliance costs in relation to CO2 emissions, as well as the additional penalties, particularly in Italy, due to introduction The change also includes the depreciation of right-of-use as- sets, which, as of January 1, 2019, are subject to depreciation over the term of the lease agreement in application of IFRS of new capacity-market regulations for the remuneration 16 (€203 million). mechanism for available capacity, which restricts the scope of application for plants with higher CO2 emissions; These effects were partially offset by reversals of impair- ment for gas plants in Italy in the amount of €265 million in > agreements with the Chilean government for the early de- response to impairment testing. 224 Consolidated Annual Report 2019In 2018, this aggregate included the impairment of biomass million), and of the Alcúdia power plant in Spain (€82 million). assets in Italy (€94 million), of the assets of Nuove Energie These effects were partially offset by the reversal of impair- (€24 million), of the Augusta and Bastardo power plants (€23 ment for the Hellas CGU (€117 million). 9.f Other operating expenses - €7,276 million Millions of euro System charges - emissions allowances Charges for energy efficiency certificates Charges for purchases of green certificates Losses on disposal of property, plant and equipment, and intangible assets Taxes and duties Gain/(Loss) on derivatives on the purchase of commodities with physical delivery (1) Other Total 2019 430 416 62 76 1,035 4,583 674 7,276 2018 443 607 41 61 1,126 (1,120) (509) 1,769 Change (13) (191) 21 15 (91) 5,703 1,183 5,507 -2.9% -31.5% 51.2% 24.6% -8.1% - - - (1) The 2018 figures have been adjusted to take account of the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) contained in the Agenda Decision of March 2019, which involved changes in the classification, with no impact on margins, of the effects of purchase and sales contracts for commodities measured at fair value through profit or loss (for more details, see note 4.3 of the consolidated financial statements). Other operating expenses increased by €5,507 million mainly This change was partially offset by a decrease in environmen- due to the reclassifications in response to the IFRIC Agenda tal compliance costs in Italy and a reduction in taxes in Spain Decision of March 2019 concerning the recognition of non-fi- for suspension (in accordance with Royal Decree no. 15/2015 nancial transactions with physical delivery within the scope of of October 5, 2018) of the application of taxes on conventional IFRS 9. For more information, see paragraph 4.3 of the notes thermal power generation and on the consumption of hydro- to the consolidated financial statements. carbons used in generation. 9.g Capitalized costs - €(2,355) million Millions of euro Personnel Materials Other Total 2019 (899) (980) (476) 2018 (836) (852) (576) (2,355) (2,264) Change (63) (128) 100 (91) -7.5% -15.0% -17.4% -4.0% Capitalized costs increased by €91 million, mainly for the de- Infrastructure and Networks Business Line in Colombia, Peru velopment and execution of increased investment within the and Italy. 225 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements10. Net income/(expense) from commodity risk management - €(733) million Millions of euro Income: - income from cash flow hedge derivatives - income from derivatives at fair value through profit or loss (1) Total income Expense: - expense on cash flow hedge derivatives - expense on derivatives at fair value through profit or loss (1) Total expense NET INCOME/(EXPENSE) FROM COMMODITY RISK MANAGEMENT 2019 2018 Change 200 1,311 1,511 (23) (2,221) (2,244) (733) 93 3,910 4,003 (68) (3,403) (3,471) 532 107 (2,599) (2,492) 45 1,182 1,227 (1,265) - -66.5% -62.3% -66.2% -34.7% -35.4% - (1) The 2018 figures have been adjusted to take account of the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) contained in the Agenda Decision of March 2019, which involved changes in the classification, with no impact on margins, of the effects of purchase and sales contracts for commodities measured at fair value through profit or loss (for more details, see note 4.3 of the consolidated financial statements). Net expense from the management of commodity risk amount- > net expense on derivatives at fair value through profit or ed to €733 million for 2019 (compared with net income of €532 loss in the amount of €910 million (compared with net in- million in 2018), which can be broken down as follows: come of €507 million in 2018); > net income on cash flow hedge derivatives in the amount of For more information on derivatives, see note 46 “Deriva- €177 million (compared with net income of €25 million in 2018); tives and hedge accounting”. 11. Net financial income/(expense) from derivatives - €342 million Millions of euro Income: - income from derivatives designated as hedging derivatives - income from derivatives at fair value through profit or loss Total income Expense: - expense on derivatives designated as hedging derivatives - expense on derivatives at fair value through profit or loss Total expense TOTAL FINANCIAL INCOME/(EXPENSE) FROM DERIVATIVES 2019 2018 Change 1,120 364 1,484 (538) (604) (1,142) 342 1,142 851 1,993 (408) (1,124) (1,532) 461 (22) (487) (509) (130) 520 390 (119) -1.9% -57.2% -25.5% 31.9% -46.3% 25.5% -25.8% Net income from derivatives on interest and exchange rates loss in the amount of €240 million (compared with net amounted to €342 million for 2019 (compared with a net in- expense of €273 million in 2018). come balance of €461 million in 2018), which can be broken down as follows: The net balances recognized in 2019 on both hedging and tra- > net income on derivatives designated as hedging derivatives ding derivatives mainly refer to the hedging of exchange risk. in the amount of €582 million (compared with net income of For more information on derivatives, see note 46 “Derivatives €734 million in 2018), mainly in respect of cash flow hedges; and hedge accounting”. > net expense on derivatives at fair value through profit or 226 Consolidated Annual Report 201912. Other net financial income/(expense) - €(2,786) million Other financial income Millions of euro Interest income from financial assets (current and non-current): - interest income at effective rate on non-current securities and receivables - interest income at effective rate on short-term financial investments Total interest income at the effective interest rate Financial income on non-current securities at fair value through profit or loss Exchange gains Income on equity investments Other income TOTAL FINANCIAL INCOME 2019 2018 Change 126 162 288 - 915 4 1,262 2,469 93 163 256 - 910 12 1,190 2,368 33 (1) 32 - 5 (8) 72 101 35.5% -0.6% 12.5% - 0.5% -66.7% 6.1% 4.3% Financial income, in the amount of €2,469 million, increased of the consolidated financial statements for the year ended by €101 million compared with the previous year, due mainly December 31, 2019 for more information. to an increase in “Other income” as a result of the application This was partly offset by the effect of the adjustment to fair to the Argentine companies of IAS 29 related to accounting value in 2018 of Enel Produzione’s financial receivable arising for hyperinflationary economies (+€179 million). See note 4.2 from the sale of 50% of Slovak Power Holding (€134 million). Other financial expense Millions of euro Interest expense on financial debt (current and non-current): - interest on bank borrowings - interest expense on bonds - interest expense on other borrowings Total interest expense Exchange losses Accretion of post-employment and other employee benefits Accretion of other provisions Charges on equity investments Other expenses TOTAL FINANCIAL EXPENSE 2019 2018 Change 386 2,030 183 2,599 1,229 135 186 2 1,104 5,255 408 1,953 127 2,488 1,378 107 169 1 734 4,877 (22) 77 56 111 (149) 28 17 1 370 378 -5.4% 3.9% 44.1% 4.5% -10.8% 26.2% 10.1% - 50.4% 7.8% Other financial expense amounted to €5,255 million, a total economies. See note 4.2 of the consolidated financial increase of €378 million compared with 2018. The change re- statements for the year ended December 31, 2019 for flects the following factors in particular: more information; > an increase in other expenses of €370 million, due largely - the effect of the recognition in 2018 of the reversal to: of impairment recognized on the financial receivable - an increase of €252 million in financial expense as a arising from the sale of 50% of Slovak Power Holding result of the application to the Argentine companies (€186 million); of IAS 29 related to accounting for hyperinflationary - a reduction of €83 million in financial expense due to an 227 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsincrease in the capitalization of charges; > a decrease of €149 million in exchange rate losses, primar- > an increase in interest expense on financing in the amount ily reflecting developments in the exchange rates associat- of €111 million. This reflected the increase in interest ex- ed with net financial debt denominated in currencies other pense on bonds (€77 million) and financial expense from than the euro. the application of IFRS 16 (€54 million); 13. Share of income/(losses) of equity investments accounted for using the equity method - €(122) million Millions of euro Share of income of associates Share of losses of associates Total 2019 120 (242) (122) 2018 521 (172) 349 Change (401) (70) (471) -77.0% -40.7% - The share of income and losses of equity investments ac- Holding (€362 million), which had been written down multiple counted for using the equity method deteriorated by €471 times in previous years. This reduction also shows the effects million compared with the previous year. In addition to reflect- of reacquiring controlling interests in 13 companies from EG- ing the Group’s shares in companies measured using the eq- PNA REP, which resulted in a change in the scope of consol- uity method, the change was due mainly to the 2018 adjust- idation and the recognition of a capital loss by EGPNA REP. ment to the fair value of the 50% stake held in Slovak Power 14. Income taxes - €836 million Millions of euro Current taxes Adjustments for income taxes relating to prior years Total current taxes Deferred tax expense Deferred tax income TOTAL 2019 2,137 (132) 2,005 (567) (602) 836 2018 2,014 (150) 1,864 92 (105) 1,851 Change 123 18 141 (659) (497) 6.1% -12.0% 7.6% - - (1,015) -54.8% The decrease in income taxes in 2019 compared with the pre- Costanera and Central Dock Sud as a result of exercising the vious year is essentially due to the reduction in income. “revalúo impositivo” option for tax incentives. In return for In percentage terms, the tax burden has decreased due, in par- payment of a tax in lieu, this mechanism allows the remea- ticular, to: surement of certain assets for tax purposes, resulting in the > the release of €494 million in deferred taxes by Enel Di- recognition of deferred tax assets and the greater deductibi- stribuição São Paulo following the merger with Enel Brasil lity of future depreciation; Investimentos Sudeste SA (Enel Sudeste); > the reversal of deferred tax liabilities by EGPNA as an an- > the agreement with the tax authorities concerning the “pa- cillary effect of the acquisition of a number of companies tent box” option, which provides for preferential taxation from EGPNA REP; of earnings resulting from the use of intellectual property > the deductibility of goodwill resulting from the merger of (€53 million); GasAtacama into Enel Generación Chile. > a decrease in taxes (in the amount of €35 million) recognized These effects were partially offset by recognition in the previous in Argentina by the generation companies Enel Generación year of the following: 228 Consolidated Annual Report 2019 > greater deferred tax assets on past losses by Enel Dis- > a reduction in deferred tax liabilities (€61 million) following tribuição Goiás as a result of the efficiency improvement the tax reform in Colombia, which led to a reduction in pro- measures implemented by the Group subsequent to the gressive tax rates from 33% to 30%. acquisition (€274 million); For more information on changes in deferred tax assets and lia- > a decrease in income taxes in Italy for the recognition of bilities, see note 22. deferred tax assets (€85 million) for the past losses of The following table provides a reconciliation of the theoretical tax 3Sun following the merger with Enel Green Power SpA; rate and the effective tax rate. Millions of euro Income before taxes Theoretical taxes Change in tax effect on impairment losses, capital gains and negative goodwill Reversal of deferred taxes in Brazil Recognition of deferred tax assets on past losses in Brazil Recognition of deferred tax assets on past losses in Italy Change in tax effect on Kino gain and other items in Mexico Impact on deferred taxation of changes in tax rates Patent box mechanism in Italy Remeasurement for tax purposes of certain assets in Argentina IRAP Other differences, effect of different tax rates abroad compared with the theoretical rate in Italy, and other minor items Total 2019 4,312 1,035 93 (494) - - - (33) (50) (35) 235 85 836 24.0% 24.0% 2018 8,201 1,968 (180) - (274) (86) 100 (61) - - 237 147 1,851 15. Basic and diluted earnings per share Both of these indicators have been calculated based on 10,166,331,854, adjusted for the 1,549,152 treasury shares an average number of ordinary shares for the year of with a par value of €1.00 each (0 at December 31, 2018). Net income from continuing operations attributable to shareholders of the Parent Company (millions of euro) Net income from discontinued operations attributable to shareholders of the Parent Company (millions of euro) Net income attributable to shareholders of the Parent Company (millions of euro) Number of ordinary shares Dilutive effect of stock options Basic and diluted earnings per share (euro) Basic and diluted earnings from continuing operations per share (euro) Basic and diluted earnings from discontinued operations per share (euro) 2019 2,174 - 2,174 2018 Change 4,789 (2,615) -54.6% - - - 4,789 (2,615) -54.6% 10,166,331,854 10,166,679,946 (348,092) - 0.21 0.21 - - 0.47 0.47 - - (0.26) (0.26) - - - -55.3% -55.3% - 229 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements16. Property, plant and equipment - €79,809 million The breakdown of and changes in property, plant and equipment for 2019 is shown below. Millions of euro Cost net of accumulated impairment Accumulated depreciation Balance at Dec. 31, 2018 Capital expenditure IFRS 16 as at Jan. 1, 2019 Assets entering service Exchange differences Change in the scope of consolidation Disposals Depreciation Impairment losses Reversals of impairment losses Other changes Reclassifications from/to assets held for sale Total changes Cost net of accumulated impairment Accumulated depreciation Balance at Dec. 31, 2019 Land Buildings Plant and machinery Industrial and commercial equipment Other assets Leased assets Leasehold improvements 655 - 655 3 - 18 (5) 9 (6) - (31) - 20 - 8 9,919 158,257 5,303 4,616 43 - 313 31 105 (13) (189) (286) 115 151 (90) 180 94,314 63,943 1,742 - 3,451 (322) 834 (66) (3,885) (3,230) 167 1,140 (310) (479) 663 10,265 160,068 - 663 5,469 4,796 96,604 63,464 503 345 158 33 - 1 - - (2) (26) (1) - (2) - 3 527 366 161 1,401 1,077 1,095 306 61 - 39 (3) 2 (3) (91) (3) - 14 - 363 714 7 1,370 - 9 51 (64) (260) - - 174 - 16 1,287 1,471 2,614 1,149 613 322 2,001 411 264 147 3 - 15 - 2 (1) (30) - - - - (11) 427 291 136 Assets under construction and advances Total 6,092 178,315 - 101,684 6,092 6,340 - (3,837) (144) (18) - - (394) - 240 (13) 76,631 8,232 1,370 - (434) 985 (155) (4,481) (3,945) 282 1,737 (413) 2,174 3,178 8,266 184,301 - 104,492 8,266 79,809 Plant and machinery includes assets to be relinquished free For more information on leased assets, see note 18 below. of charge with a net carrying amount of €8,976 million (€8,747 million at December 31, 2018), largely regarding power plants The types of capital expenditure made during 2019 are sum- in Iberia and Latin America amounting to €4,267 million marized below. These expenditures, totaling €8,924 million, (€4,390 million at December 31, 2018), and the electricity increased by €2,394 million from 2018, an increase that was distribution network in Latin America totaling €3,911 million particularly concentrated in solar power plants. (€3,806 million at December 31, 2018). Millions of euro Power plants: - thermal - hydroelectric - geothermal - nuclear - alternative energy sources Total power plants Electricity distribution networks (1) Land, buildings, and other assets and equipment TOTAL 2019 602 382 145 130 3,695 4,954 3,874 96 8,924 2018 400 504 114 156 2,170 3,344 3,090 96 6,530 (1) The figure for 2019 includes €692 million in infrastructure investments within the scope of IFRIC 12 (€271 million in 2018). 230 Consolidated Annual Report 2019Capital expenditure on power plants amounted to €4,954 million, an increase of €1,610 million on the previous year, essentially re- flecting increased investment in alternative energy plants. Cap- In Spain, the deterioration in the market in relation to devel- opments in commodity prices and the functioning of the CO2 emissions market in the 3rd Quarter of 2019 compromised ital expenditure on power plants is mainly attributable to wind the competitiveness of coal-fired plants. In Italy, in addition to farms in North America, Spain, Brazil, South Africa and Greece, a deterioration in market conditions, implementation of new and on solar plants in the United States, Brazil and Spain. capacity market regulations for the remuneration mechanism Capital expenditure on the electricity distribution network amounted to €3,874 million, an increase of €784 million compared with the previous year, and mainly concerned ser- for available capacity restricted the scope of future application for plants with higher CO2 emission, excluding coal technolo- gy from the electricity market. For these reasons, the carrying vice-quality improvements in Italy and Brazil and the produc- amount of a number of coal-fired plants in Italy and Spain, tion of smart meters in the amount of €730 million. including the associated dismantling costs, has been written The change in the scope of consolidation in 2019 mainly con- These effects were partially offset by reversals of impairment cerns the acquisition of controlling interests in a number of for gas plants in Italy in the amount of €265 million following down by a total of €3,527 million. companies of EGPNA REP, a joint venture held equally by EG- impairment testing. PNA (now Enel North America) and General Electric Capital’s Energy Financial Services, companies that were previously Reclassifications from/to assets held for sale mainly concern measured using the equity method (€1,033 million), and the the Reftinskaya GRES plant, which was sold by Enel Russia to acquisition of Tradewind Energy, a company developing renew- JSC Kuzbassenergo in the 4th Quarter of 2019. able energy projects in the United States, and YouSave SpA. Other changes include the provisioning of decommissioning Impairment mainly concerns adjustments to the carrying amount costs and plant restoration charges in Italy and Spain in the of a number of coal-fired plants in Italy, Spain, Chile and Russia. amount of €825 million, mainly in respect of coal-fired plants, In Chile, specifically, the value of two plants has been adjust- the effects of IAS 29 on property, plant and equipment for a to- ed due in part to the agreement reached with the Chilean tal of €462 million and the effect of capitalizing interest on loans government concerning their early decommissioning, and the specifically dedicated to capital expenditures in the amount of value of the Reftinskaya coal-fired plant in Russia has been €159 million (€77 million in 2018), as detailed below. adjusted due to its sale. Millions of euro Enel Green Power SpA Enel Green Power Brazil Enel Green Power North America Enel Green Power México Enel Green Power South Africa Enel Américas Group Enel Chile Group Endesa Group Enel Green Power España Group Enel Russia Group Enel Green Power India Group Enel Produzione Enel Finance International Total 2019 Rate % 2018 Rate % Change 1.2% 5.8% 0.2% 7.0% 6.4% 8.3% 8.0% 1.8% 1.8% 9.1% 7.5% 4.8% 1.6% 4 16 16 36 17 14 12 3 3 5 3 9 21 159 1.7% 0.9% 0.5% 5.2% 6.3% 8.5% 7.7% 1.9% - - - 4.8% - 4 19 9 3 6 16 9 4 - - - 7 - 77 - (3) 7 33 11 (2) 3 (1) 3 5 3 2 21 82 - -15.8% 77.8% - - -12.5% 33.3% -25.0% - - - 28.6% - - At December 31, 2019, contractual commitments to purchase property, plant and equipment amounted to €763 million. 231 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements17. Infrastructure within the scope of “IFRIC 12 - Service concession arrangements” Service concession arrangements, which are recognized in The following table summarizes the salient details of those accordance with IFRIC 12, regard certain infrastructure serv- concessions. ing concessions for electricity distribution in Brazil. Millions of euro Enel Distribuição Rio Enel Distribuição Ceará Enel Green Power Mourão Enel Green Power Paranapanema Celg Distribuição Enel Green Power Volta Grande Enel Distribuição São Paulo Total Grantor Brazilian government Brazilian government Brazilian government Brazilian government Brazilian government Brazilian government Brazilian government Activity Electricity distribution Electricity distribution Power generation Power generation Electricity distribution Power generation Electricity distribution Country Concession period Concession period remaining Renewal option Brazil 1997-2026 7 years Brazil 1998-2028 9 years Brazil 2016-2046 27 years Brazil 2016-2046 27 years Brazil 2015-2045 26 years Brazil 2017-2047 28 years Brazil 1998-2028 9 years Yes Yes No No No No No Amount recognized among assets from contracts with clients at Dec. 31, 2019 Amount recognized among financial assets at Dec. 31, 2019 Amount recognized among intangible assets at Dec. 31, 2019 134 61 - - 99 - 185 479 800 525 6 30 33 316 1,003 2,714 641 591 - - 491 - 893 2,616 The value of the assets at the end of the concessions classified under financial assets has been measured at fair value. For more information, see note 47 “Assets measured at fair value”. 18. Leases As at January 1, 2019, the effects on property, plant and equipment of the application of IFRS 16 totaled €1,370 million. The table below shows the changes in right-to-use assets in 2019. Leased land Leased buildings Leased plant Other leased assets 10 520 4 (23) 34 545 36 679 - (124) 10 601 518 - 5 (30) (5) 488 150 171 - (83) 129 367 Total 714 1,370 9 (260) 168 2,001 Millions of euro Total at December 31, 2018 IFRS 16 as at Jan. 1, 2019 Exchange rate differences Depreciation Other changes Total at December 31, 2019 232 Consolidated Annual Report 2019Lease liabilities and changes during the year are shown in the table below. Millions of euro Total at December 31, 2018 IFRS 16 as at Jan. 1, 2019 Increases Payments Other changes Total at December 31, 2019 of which medium to long term of which short term Millions of euro Depreciation of right-of-use assets Interest expense on lease liabilities Expense relating to short-term leases (included in cost for services and other materials) Expense relating to leases of low-value assets (included in cost for services and other materials) Variable lease payments (included in cost for services and other materials) Total 19. Investment property - €112 million Investment property at December 31, 2019, came to €112 million, a decrease of €23 million year on year. Millions of euro Cost net of accumulated impairment Accumulated depreciation Balance at Dec. 31, 2018 Depreciation Impairment losses Other changes Total changes Cost net of accumulated impairment Accumulated depreciation Balance at Dec. 31, 2019 657 1,370 224 (212) (75) 1,964 1,689 275 2019 260 57 50 4 9 380 179 44 135 (3) (24) 4 (23) 157 45 112 The Group’s investment property consists of properties in The change for the year was mainly due to impairment reco- Italy, Spain, Brazil and Chile, which are free of restrictions on gnized on a number of assets of Enel Italia. the sale of the investment property or the remittance of in- come and proceeds of disposal. In addition, the Group has For more information on the valuation of investment proper- no contractual obligations to purchase, construct or develop ty, see notes 47 “Assets measured at fair value”, and 47.1 investment property or for repairs, maintenance or enhance- “Fair value of other assets”. ments. 233 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements20. Intangible assets - €19,089 million A breakdown of and changes in intangible assets for 2019 are shown below: Industrial patents & intellectual property rights Concessions, licenses, trademarks and similar rights Development costs Service concession arrangements Other Leasehold improvements Assets under development and advances Contract costs Total 42 19 23 1 12 - 4 - 2,352 1,987 365 120 306 (4) 1 - (4) (226) - - (13) - - 46 23 23 (2) - 22 - 217 2,767 2,185 582 15,246 1,705 13,541 1 6 (104) 1 - (206) (1) 4 4 - 6,899 3,294 4,119 2,780 - - (45) - (14) 2,479 815 46 255 (2) 50 - (373) (283) - - (82) - 269 146 - - (295) (163) 130 15,083 1,837 13,246 6,987 3,747 4,370 2,802 2,617 945 - - - - - - 7 - - - - - - 7 10 3 7 985 - 985 562 (579) (18) 144 (1) - (3) - (18) (12) 75 986 29,804 481 10,790 505 19,014 293 1,023 - - - 1 - (173) 207 (14) (187) (1,279) (1) - (2) - 104 (89) 4 408 (12) 75 1,060 1,275 30,975 - 666 11,886 1,060 609 19,089 Millions of euro Cost net of accumulated impairment Accumulated depreciation Balance at Dec. 31, 2018 Capital expenditure Assets entering service Exchange differences Change in the scope of consolidation Disposals Depreciation Impairment losses Reversals of impairment losses Other changes Reclassifications from/to assets held for sale Total changes Cost net of accumulated impairment Accumulated depreciation Balance at Dec. 31, 2019 In 2019, intangible assets registered a net increase of €75 mil- and applications, making it possible to simplify our organiza- lion. The rise mainly reflects the capitalization of the Group’s new tional model and redesign certain key processes and oper- investments in digital transformation initiatives and a number of ating approaches, increasing their effectiveness and overall acquisitions of highly innovative industrial assets. efficiency. Industrial patents and intellectual property rights relate main- The item also includes the portion of the value of patents that ly to costs incurred in purchasing software and open-ended can be recognized in accordance with the provisions of the in- software licenses. The most important applications relate to ternational accounting standards. Amortization is calculated on a invoicing and customer management, the development of straight-line basis over the asset’s residual useful life. Internet portals and the management of company systems. Concessions, licenses, trademarks and similar rights include the The increase recorded in 2019 (+59%) is mainly due to the costs incurred for the acquisition of customers by the foreign Group’s investments in digital transformation initiatives. electricity distribution and gas sales companies. Amortization is Among these, the “Digitaly” project deserves special men- calculated on a straight-line basis over the term of the average tion (€55.5 million). It seeks to introduce digital technologies period of the relationship with customers or of the concessions. 234 Consolidated Annual Report 2019The following table reports service concession arrangements that do not fall within the scope of IFRIC 12 and had a balance as at December 31, 2019. Millions of euro Endesa Distribución Eléctrica Codensa Enel Distribución Chile (formerly Chilectra) Enel Distribución Perú (formerly Empresa de Distribución Eléctrica de Lima Norte) E- Distribut¸ie Muntenia Grantor - Republic of Colombia Republic of Chile Republic of Peru Romanian Ministry for the Economy Activity Electricity distribution Electricity distribution Electricity distribution Electricity distribution Electricity distribution Country Concession period Concession period remaining Renewal option at Dec. 31, 2019 Initial fair value Spain Indefinite Indefinite Colombia Indefinite Indefinite Chile Indefinite Indefinite Peru Indefinite Indefinite - - - - 5,678 5,673 1,469 1,839 1,433 1,667 638 548 Romania 2005-2054 34 years Yes 131 191 The item includes assets with an indefinite useful life in the license, as well as customer lists acquired externally and other amount of €9,218 million (€9,271 million at December 31, intangible assets of various types. 2018), essentially accounted for by concessions for distribution activities in Spain (€5,678 million), Colombia (€1,469 million), The change in the scope of consolidation for 2019 mainly refers Chile (€1,433 million), and Peru (€638 million), for which there is to the companies acquired in North America from EGPNA REP. no statutory or currently predictable expiration date. On the ba- sis of the forecasts developed, cash flows for each CGU, with Impairment losses amounted to €89 million in 2019. For more which the various concessions are associated, are sufficient information, see note 9.e. to recover the carrying amount. The change during the year is essentially attributable to changes in exchange rates. For more Other changes include the reclassification of public-to-pri- information on service concession arrangements, see note 17. vate service concession agreements (under development) to non-current assets deriving from contracts with customers in “Other” intangible assets mainly consist of investments in dig- Brazil in application of IFRS 15. ital applications for which there is no ownership title or use 235 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements21. Goodwill - €14,241 million Millions of euro at Dec. 31, 2018 Cost Cumulative impairment Net car- rying amount 11,177 1,209 276 561 530 1,420 54 106 328 - 579 23 426 3 (2,392) 8,785 - - - - - - (11) - - - (3) (13) - 1,209 276 561 530 1,420 54 95 328 - 579 20 413 3 Iberia (1) Chile Argentina Peru Colombia Brazil Central America Enel Green Power North America Enel X North America PayTipper (2) Market Italy (3) Enel Green Power Italy Romania (4) Tynemouth Energy Total 16,692 (2,419) 14,273 Change in consol. Exchange rate diff. Impairment losses Offsetting cost with accum. impairment Other changes at Dec. 31, 2019 Cost Cumulative impairment Net carrying amount - - - - - - (13) - - 19 - - - - 6 - - - - - (9) 1 2 7 - - - (10) - (9) - - - - - - - - - - - - - - (27) 38 - - - - - - - - - 3 - - - 11,177 (2,392) 8,785 - - - - - - - - - - - (2) - 1,209 276 561 530 1,411 42 70 335 19 579 20 414 3 - - - - - - - - - - - (13) - 1,209 276 561 530 1,411 42 70 335 19 579 20 401 3 (27) 41 (2) 16,646 (2,405) 14,241 (1) Includes Endesa and Enel Green Power España. (2) The figure can be subject to change once the purchase-price allocation process has been finalized. For more information, see note 6. (3) Includes Enel Energia. (4) Includes E-Distribut¸ie Muntenia, Enel Energie Muntenia and Enel Green Power Romania. The €32 million decrease in goodwill can be attributed most- counted cash flow models, which involve estimating expect- ly to impairment in the amount of €27 million, which con- ed future cash flows and applying an appropriate discount cerns the impairment loss on the wind farm of Padoma Wind rate, selected on the basis of market inputs such as risk-free Power, a company of the Enel Green Power North America rates, betas and market-risk premiums. Group. Although the CGUs have not changed since last year, the im- pairment tests were carried out this year at the level of the The exchange rate differences are mainly due to unfavorable operating segment within the CGU resulting from the combi- exchange rate developments in Romania and Brazil, which nation of Business Lines and countries/regions. were partially offset by the positive impact of the US dollar. Cash flows were determined on the basis of the best infor- mation available at the time of the estimate, taking account of The criteria used to identify the cash generating units (CGUs) the specific risks of each CGU, and drawn: were essentially based – in line with management’s strategic > for the explicit period, from the business plan approved by and operational vision – on the specific characteristics of their the Board of Directors of the Parent Company on November business, on the operational rules and regulations of the mar- 25, 2019, containing forecasts for volumes, revenue, oper- kets in which Enel operates, on the corporate organization, ating costs, capital expenditure, industrial and commercial and on the level of reporting monitored by management. organization and developments in the main macroeconom- The recoverable value of the goodwill recognized was esti- rates) and commodity prices. The explicit period of cash mated by calculating the value in use of the CGUs using dis- flows considered in impairment testing was five years; ic variables (inflation, nominal interest rates and exchange 236 Consolidated Annual Report 2019Goodwill matrix Millions of euro Italy Enel Green Power Enel Energia Other Iberia Latin America Argentina Brazil Chile Colombia Peru Panama Europe and Euro- Mediterranean Affairs Romania Other countries North America United States and Canada Mexico Total Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Other Total - - - - - 44 - - - - 43 - 3 - 3 - - - 20 20 - - 1,190 1,961 40 397 996 307 198 23 - - - 89 70 19 - - - - 5,788 2,005 236 1,014 213 223 320 - 342 342 - - - - 579 - 579 - 1,807 - - - - - - - 59 59 - - - - 47 3,260 8,135 2,445 19 - - 19 - - - - - - - - - - - 335 335 - 354 - - - - - - - - - - 35 (35) - - - - - - - - - - - - - - - - - - - - - - - - 618 20 579 19 8,785 4,010 276 1,411 1,209 530 561 23 404 401 3 424 405 19 35 (35) 14,241 > for subsequent years, from assumptions concerning long- take account of: (i) the value resulting from the remaining term developments in the main variables that determine useful lives of the plants; and (ii) the residual value, in the cash flows, the average residual useful life of assets or the event of plant decommissioning, associated with licensing duration of the concessions. rights, the competitiveness of the production facilities (in More specifically, the terminal value calculated based on the terms of natural resources), and network interconnectivity. specific characteristics of the businesses related to the vari- The nominal growth rate is equal to the long-term rate of ous CGUs subject to impairment testing: growth in electricity and/or inflation (depending on the coun- > perpetuity, for the businesses of large-hydro (LH) power try and business involved) and in any case no higher than the generation and of distribution, in which the licenses and average long-term growth rate of the reference market. public concessions are of a long-term nature and are easily The value in use calculated as described above was found to renewable; as well as for the Enel X businesses, as they be greater than the amount recognized on the balance sheet. feature the development of specific know-how that is sus- In order to verify the robustness of the value in use of the tainable over the long term; CGUs, sensitivity analyses were conducted for the main driv- > annuity, for CGUs that are predominantly characterized by ers of the values, in particular WACC, the long-term growth retail business, for which the residual life is, therefore, es- rate and margins, the outcomes of which fully supported that sentially correlated with the average duration of the cus- value. tomer relationships; as well as for businesses of conven- tional thermal power generation (G&T). It is also used for the renewable energy (Enel Green Power) businesses to 237 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsThe table below reports the composition of the main goodwill and the time horizon over which the expected cash flows values according to the company to which the cash genera- have been discounted. ting unit (CGU) belongs, along with the discount rates applied Millions of euro Amount Growth rate (1) Pre-tax WACC discount rate (2) Explicit period of cash flows Terminal value (3) at Dec. 31, 2019 Amount Growth rate (1) rate (2) Explicit period of cash flows Terminal value (3) Pre-tax WACC discount at Dec. 31, 2018 8,785 1,209 1,420 276 561 530 54 95 328 579 20 413 n/a 3 1.61% 2.63% 7.14% 3.38% 2.97% 4.00% 1.46% 2.27% 2.27% 0.73% 0.99% 2.37% n/a n/a 6.88% 7.53% 20.07% 6.82% 9.30% 9.46% 8.98% 6.83% 10.31% 10.98% 6.65% 6.78% n/a n/a 5 years Perpetuity/24 years 5 years Perpetuity/25 years 5 years Perpetuity 5 years Perpetuity/26 years 5 years Perpetuity/28 years Perpetuity/26 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years n/a n/a 24 years 25 years Perpetuity 15 years Perpetuity/23 years Perpetuity/18 years n/a n/a Iberia (4) Chile Argentina Peru Colombia Brazil Central America Enel Green Power North America Enel X North America Market Italy (5) Enel Green Power Italy Romania (6) PayTipper SpA Tynemouth Energy 8,785 1,209 276 561 530 1,411 42 70 335 579 20 401 19 3 1.80% 2.07% 6.36% 2.39% 2.97% 3.61% 2.01% 2.01% 2.01% 0.48% 1.03% 2.00% n/a n/a 4.59% 7.41% 21.84% 7.46% 9.01% 10.64% 9.68% 6.58% 10.89% 10.23% 6.15% 7.27% n/a n/a 5 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years Perpetuity/26 years EGP/9 years G&T Perpetuity/25 years EGP/9 years G&T Perpetuity/1 year G&T/4 years LH Perpetuity/23 years EGP/9 years G&T Perpetuity/27 years EGP/16 years G&T Perpetuity/26 years EGP/7 years G&T 22 years 24 years Perpetuity 15 years 5 years Perpetuity/25 years 5 years Perpetuity/17 years n/a n/a n/a n/a (1) Perpetual growth rate for cash flows after the explicit forecast period. (2) Pre-tax WACC calculated using the iterative method: the discount rate that ensures that the value in use calculated with pre-tax cash flows is equal to that calculated with post-tax cash flows discounted with the post-tax WACC. (3) The terminal value has been estimated on the basis of a perpetuity or an annuity with a rising yield for the years indicated in the column (G&T = Generation & Trading, EGP = Enel Green Power, LH = Large Hydro). (4) Includes Endesa and Enel Green Power España. (5) Includes Enel Energia. (6) Includes E-Distribut¸ie Muntenia, Enel Energie Muntenia and Enel Green Power Romania. At December 31, 2019, impairment tests conducted for the the countries/regions to which goodwill was allocated found CGUs and at the level of the operating segments within the no impairment losses. CGUs identified at the intersection of the Business Lines and 238 Consolidated Annual Report 2019Millions of euro Amount Growth rate (1) rate (2) flows Terminal value (3) Amount Growth rate (1) rate (2) Explicit period of cash flows Terminal value (3) Pre-tax WACC discount Explicit period of cash Pre-tax WACC discount at Dec. 31, 2019 at Dec. 31, 2018 Iberia (4) Chile Argentina Peru Colombia Brazil Central America Enel Green Power North America Enel X North America Market Italy (5) Enel Green Power Italy Romania (6) PayTipper SpA Tynemouth Energy 8,785 1,209 1,411 276 561 530 42 70 335 579 20 401 19 3 1.80% 2.07% 6.36% 2.39% 2.97% 3.61% 2.01% 2.01% 2.01% 0.48% 1.03% 2.00% n/a n/a 4.59% 7.41% 21.84% 7.46% 9.01% 10.64% 9.68% 6.58% 10.89% 10.23% 6.15% 7.27% n/a n/a 5 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years n/a n/a Perpetuity/26 years EGP/9 years G&T Perpetuity/25 years EGP/9 years G&T Perpetuity/1 year G&T/4 years LH Perpetuity/23 years EGP/9 years G&T Perpetuity/27 years EGP/16 years G&T Perpetuity/26 years EGP/7 years G&T 22 years 24 years Perpetuity 15 years n/a n/a 5 years Perpetuity/25 years 5 years Perpetuity/17 years (1) Perpetual growth rate for cash flows after the explicit forecast period. calculated with post-tax cash flows discounted with the post-tax WACC. (2) Pre-tax WACC calculated using the iterative method: the discount rate that ensures that the value in use calculated with pre-tax cash flows is equal to that (3) The terminal value has been estimated on the basis of a perpetuity or an annuity with a rising yield for the years indicated in the column (G&T = Generation & Trading, EGP = Enel Green Power, LH = Large Hydro). (4) Includes Endesa and Enel Green Power España. (5) Includes Enel Energia. (6) Includes E-Distribut¸ie Muntenia, Enel Energie Muntenia and Enel Green Power Romania. 8,785 1,209 276 561 530 1,420 54 95 328 579 20 413 n/a 3 1.61% 2.63% 7.14% 3.38% 2.97% 4.00% 1.46% 2.27% 2.27% 0.73% 0.99% 2.37% n/a n/a 6.88% 7.53% 20.07% 6.82% 9.30% 9.46% 8.98% 6.83% 10.31% 10.98% 6.65% 6.78% n/a n/a 5 years Perpetuity/24 years 5 years Perpetuity/25 years 5 years Perpetuity 5 years Perpetuity/26 years 5 years Perpetuity/28 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years n/a n/a Perpetuity/26 years 24 years 25 years Perpetuity 15 years Perpetuity/23 years Perpetuity/18 years n/a n/a 239 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements22. Deferred tax assets and liabilities - €9,112 million and €8,314 million The following table details changes in deferred tax assets and the amount of deferred tax assets offsettable, where permit- liabilities by type of timing difference and calculated based on ted, with deferred tax liabilities. the tax rates established by applicable regulations, as well as Increase/ (Decrease) taken to income statement Increase/ (Decrease) taken to equity at Dec. 31, 2018 Change in the scope of consolidation Translation adjustment Other changes Reclassifications of assets held for sale at Dec. 31, 2019 1,669 726 (11) (3) (1) (7) 1,726 (119) 508 801 869 2,732 8,305 56 37 6 (104) 602 6,638 (623) 403 1,609 8,650 41 15 (567) (1) - (60) 209 1 138 (3) 36 8 41 - - - - 1 (2) 89 - 9 98 (29) 126 (5) 1 (10) (1) (45) (90) 1 (16) (105) (57) 7 12 35 116 82 - 115 197 - - - - - - - - - - - 2,372 1,702 502 786 1,086 2,664 9,112 6,093 481 1,740 8,314 4,743 3,054 891 Millions of euro Deferred tax assets: - differences in the value of intangible assets, property, plant and equipment - accruals to provisions for risks and charges and impairment losses with deferred deductibility - tax loss carried forward - measurement of financial instruments - employee benefits - other items Total Deferred tax liabilities: - differences on non-current and financial assets - measurement of financial instruments - other items Total Non-offsettable deferred tax assets Non-offsettable deferred tax liabilities Excess net deferred tax liabilities after any offsetting At December 31, 2019, deferred tax assets, recognized when Deferred tax liabilities amounted to €8,314 million at Decem- there is a reasonable certainty of their recoverability, totaled ber 31, 2019 (€8,650 million at December 31, 2018). They es- €9,112 million (€8,305 million at December 31, 2018). sentially include the determination of the tax effects of the Deferred tax assets increased by €809 million during the year value adjustments to assets acquired as part of the final al- due, essentially, to taxes recognized in 2019 on the impair- location of the cost of acquisitions made in the various years ment of coal-fired plants in Italy and Spain. and the deferred taxation in respect of the differences betwe- It should also be noted that deferred tax assets (in the amount en depreciation charged for tax purposes, including accele- of €279 million) were not recorded in relation to prior tax los- rated depreciation, and depreciation based on the estimated ses in the amount of €965 million because, on the basis of useful lives of assets. current estimates of future taxable income, it is not certain Deferred tax liabilities decreased by a total of €336 million that such assets will be recovered. due, in particular, to the release of €494 million in deferred ta- 240 Consolidated Annual Report 2019xes of Enel Distribuição São Paulo following the merger with of net assets on the books at the time of the acquisition of Enel Brasil Investimentos Sudeste SA (Enel Sudeste), which Enel Distribuição São Paulo. This decrease was partially offset nullified the differences between fiscal and carrying amounts by the effects of hyperinflation. 241 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements23. Equity investments accounted for using the equity method - €1,682 million Investments in joint arrangements and associated companies accounted for using the equity method are as follows. Millions of euro at Dec. 31, 2018 % held Income effect Change in consol. Dividends Reclassifications from/to assets held for sale Other changes Joint arrangements Slovak Power Holding 497 50.0% 72 43.8% (7) EGPNA Renewable Energy Partners OpEn Fiber Zacapa Topco Sàrl Project Kino companies Tejo Energia Produção e Distribuição de Energia Elétrica Rocky Caney Holding Drift Sand Wind Project Front Marítim del Besòs Enel Green Power Bungala Rusenergosbyt Energie Electrique de Tahaddart Transmisora Eléctrica de Quillota PowerCrop Centrales Hidroeléctricas de Aysén Nuclenor Associates CESI Tecnatom Suministradora Eléctrica de Cádiz Compañía Eólica Tierras Altas Cogenio Srl Other Total 459 50.0% 394 147 50.0% 21.4% 79 20.0% 20.0% 50.0% 61.4% 50.0% 49.5% 32.0% 50.0% 50.0% 51.0% 50.0% 42.7% 45.0% 33.5% 37.5% 20.0% 43 36 37 40 35 27 12 - - - 57 29 10 11 8 106 2,099 (14) (76) (58) (7) (21) 4 3 - 3 44 2 1 (9) - - 7 1 4 - 1 - - (178) - (5) - - - - - - - - - - - - - - - - - - - - - - - (6) - - - - (41) (3) (5) - - - - - (3) (2) - (15) (75) % held at Dec. 31, 2019 504 137 384 130 50.0% 20.0% 50.0% 20.6% 60 20.0% 58 43.8% 20.0% 50.0% 61.4% 51.0% 49.5% 32.0% 50.0% 50.0% 51.0% 50.0% 42.7% 45.0% 33.5% 37.5% 20.0% 46 36 37 - 40 26 7 - - - 61 30 11 9 11 95 - (84) - - - - - - - - - - - - - - - - - - - - 21 16 48 (5) 2 (1) (1) (3) - (43) 2 - (1) 9 - - (3) - - - 2 4 (122) (183) (84) 47 1,682 Income effect includes the positive and negative income fig- held in these companies by the Enel Group and mainly con- ures recognized by the companies in proportion to the share cerns the EGPNA (now Enel North America) repurchase of 242 Consolidated Annual Report 201913 companies that own seven operating renewable energy Other changes mainly include the pro rata changes in the OCI plants from the EGPNA REP joint venture. reserves or other changes recognized directly in equity. In particular, €21 million for Slovak Power Holding refers to OCI The change in the scope of consolidation therefore mainly con- changes on cash flow hedge derivatives, while €48 million cerns this operation, as well as the subsequent sale by EGPNA for OpEn Fiber is attributable to an increase in reserves for (now named Enel North America) of 30% of its stake in the future capital increases by shareholders (€66 million) and OCI EGPNA REP joint venture, which owns a number of companies reserves for cash flow hedge derivatives (-€18 million). The developing wind power projects (the Athena operation, which negative impact of €43 million recognized by the Enel Green resulted in a capital loss of €25 million) and the reduction in Power Bungala companies in Australia refers to the fair value the share held in the special-purpose vehicle Zacapa Topco Sàrl, remeasurement of the PPAs signed with customers. which holds 100% of Ufinet International, a leading Latin Amer- ican wholesale operator of fiber-optic networks. The reclassification of €84 million to assets held for sale re- fers to the share held by EGPNA REP Holding LLC in the com- panies developing hydroelectric projects. 243 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsThe following tables provide a summary of financial information for each joint arrangement and associate of the Group not classified as held for sale in accordance with IFRS 5. Millions of euro Non-current assets Current assets Total assets Non-current liabilities Current liabilities Total liabilities Shareholders’ equity at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 Joint arrangements Slovak Power Holding OpEn Fiber Zacapa Topco Sàrl Rusenergosbyt Tejo Energia Produção e Distribuição de Energia Elétrica Energie Electrique de Tahaddart Associates CESI Tecnatom Suministradora Eléctrica de Cádiz Compañía Eólica Tierras Altas 10,182 3,070 1,376 3 146 77 198 62 19 4 9,295 2,084 1,343 3 203 91 75 51 6 6 702 421 99 144 132 20 13 64 66 23 922 313 81 116 163 11 68 67 70 27 10,884 3,491 1,475 147 278 97 211 126 85 27 10,217 2,397 1,424 119 366 102 143 118 76 33 6,385 1,894 753 - 25 6 21 35 33 2 5,643 1,043 669 - 72 8 13 29 26 3 755 828 73 131 85 8 - 24 20 2 981 565 65 112 126 9 55 24 21 2 7,140 2,722 826 131 110 14 21 59 53 4 6,624 1,608 734 112 198 17 68 53 47 5 3,744 3,593 769 649 16 168 83 190 67 32 23 789 690 7 168 85 75 65 29 28 244 Consolidated Annual Report 2019Millions of euro Non-current assets Current assets Total assets Non-current liabilities Current liabilities Total liabilities Shareholders’ equity at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 Joint arrangements Slovak Power Holding OpEn Fiber Zacapa Topco Sàrl Rusenergosbyt Tejo Energia Produção e Distribuição de Energia Elétrica Energie Electrique de Tahaddart Associates CESI Tecnatom Suministradora Eléctrica de Cádiz Compañía Eólica Tierras Altas 10,182 3,070 1,376 3 146 77 198 62 19 4 9,295 2,084 1,343 3 203 91 75 51 6 6 702 421 99 144 132 20 13 64 66 23 922 313 81 116 163 11 68 67 70 27 10,884 3,491 1,475 147 278 97 211 126 85 27 10,217 2,397 1,424 119 366 102 143 118 76 33 6,385 1,894 753 - 25 6 21 35 33 2 5,643 1,043 669 - 72 8 13 29 26 3 755 828 73 131 85 8 - 24 20 2 981 565 65 112 126 9 55 24 21 2 7,140 2,722 826 131 110 14 21 59 53 4 6,624 1,608 734 112 198 17 68 53 47 5 3,744 3,593 769 649 16 168 83 190 67 32 23 789 690 7 168 85 75 65 29 28 245 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsMillions of euro Joint arrangements Slovak Power Holding OpEn Fiber Zacapa Topco Sàrl Rusenergosbyt Tejo Energia Produção e Distribuição de Energia Elétrica Energie Electrique de Tahaddart Associates CESI Tecnatom Suministradora Eléctrica de Cádiz Compañía Eólica Tierras Altas 24. Derivatives Total revenue at Dec. 31, 2019 at Dec. 31, 2018 Income before taxes at Dec. 31, 2019 at Dec. 31, 2018 Net income from continuing operations at Dec. 31, 2019 at Dec. 31, 2018 2,600 2,587 186 208 114 91 2,548 2,378 145 37 111 104 18 12 234 35 114 97 10 12 172 (157) (22) 111 21 9 9 2 11 2 205 (162) (21) 88 30 7 11 - 6 4 131 (117) (32) 89 14 6 6 2 11 1 103 (127) (25) 70 21 5 7 - 6 3 Millions of euro Non-current Current Derivative financial assets Derivative financial liabilities at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 1,383 2,407 1,005 2,609 4,065 3,554 3,914 4,343 For more information on derivatives classified as non-current financial assets, please see note 46 for hedging derivatives and trading derivatives. 25. Current/Non-current assets/(liabilities) deriving from contracts with customers Millions of euro Non-current Current Assets deriving from contracts with customers Liabilities deriving from contracts with customers at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 487 6,301 346 6,306 166 1,328 135 1,095 Non-current assets deriving from contracts with customers Current assets deriving from contracts with customers main- refer mainly to assets under development resulting from pub- ly concern outstanding construction contracts (€140 million), lic-to-private service concession arrangements recognized in payments on which are subject to the fulfillment of a perfor- accordance with IFRIC 12 and which have an expiration of be- mance obligation. yond 12 months (€479 million). These cases arise when the contract holder has not yet obtained the full right to recognize The figure at December 31, 2019 for non-current liabilities de- the asset from the grantor at the hypothetical conclusion of the riving from contracts with customers is mainly attributable to concession arrangement in that there remains a contractual ob- distribution in Italy (€3,520 million), Spain (€2,364 million), and ligation to ensure that the asset becomes operational. It should Romania (€411 million). also be noted that the figure at December 31, 2019 includes investments for the period in the amount of €692 million. Current liabilities deriving from contracts with customers in- 246 Consolidated Annual Report 2019clude the contractual liabilities related to revenue from con- the amount of €793 million recognized in Italy and Spain, as nections to the electricity grid expiring within 12 months in well as liabilities for construction contracts (€504 million). 26. Other non-current financial assets - €6,006 million Millions of euro Equity investments in other companies measured at fair value Receivables and securities included in net financial debt (see note 26.1) Service concession arrangements Non-current prepaid financial expense Total at Dec. 31, 2019 at Dec. 31, 2018 Change 72 3,185 2,702 47 6,006 63 3,272 2,415 19 5,769 9 (87) 287 28 237 14.3% -2.7% 11.9% - 4.1% The change in other non-current financial assets particularly arrangements, which have been recognized in accordance reflects the higher value of service concession arrangements, with IFRIC 12. recognized above all in Brazil, which concern amounts paid to the licensing authorities for the construction and/or improve- The following is a breakdown of equity investments in other ment of public service infrastructures involved in concession companies measured at fair value: Millions of euro Galsi Empresa Propietaria de la Red SA European Energy Exchange Athonet Srl Korea Line Corporation Hubject GmbH Other Total at Dec. 31, 2019 % held at Dec. 31, 2018 % held Change 17.6% 11.1% 2.2% 16.0% 0.3% 12.5% 14 17 8 7 2 10 14 72 17.6% 11.1% 2.2% 16.0% 0.3% - 14 17 8 7 2 - 15 63 - - - - - 10 (1) 9 26.1 Other non-current financial assets included in net financial debt - €3,185 million Millions of euro Securities at FVOCI Other financial receivables Total at Dec. 31, 2019 at Dec. 31, 2018 Change 416 2,769 3,185 360 2,912 3,272 56 (143) (87) 15.6% -4.9% -2.7% Securities measured at FVOCI represent financial instruments to reimbursement of the extraordinary costs incurred by in which the Dutch insurance companies invest a portion of distributors for the early replacement of electromechanical their liquidity. meters with electronic devices; The reduction in other financial receivables is mainly attribut- > €220 million for the decrease in the financial receivable able to: that was recognized in 2018 by Enel North America from > €96 million for the reclassification of medium- and long- EGPNA Preferred Wind Holdings. This loan was repaid with term financial receivables to short-term financial receiva- the reacquisition of EGPNA REP; bles and securities of the receivable of e-distribuzione from > an increase of €106 million in Enel Finance International’s CSEA (€55 million) and the receivable (€41 million) related receivable from Slovak Power Holding. 247 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements27. Other non-current assets - €2,701 million Millions of euro Receivables from institutional market operators Other receivables Total at Dec. 31, 2019 at Dec. 31, 2018 Change 232 2,469 2,701 200 1,072 1,272 32 1,397 1,429 16.0% - - Receivables from institutional market operators are essential- similar to VAT and is applied on the sale of goods, telecommu- ly unchanged from the previous year. nications and transport. Electricity distribution companies in Brazil have filed separa- At December 31, 2019, other receivables mainly regarded tax te law suits against the Brazilian government’s application of receivables in the amount of €1,587 million (€231 million at PIS/COFINS for the portion calculated on the ICMS tax. December 31, 2018), security deposits in the amount of €418 These companies include Enel Distribuição São Paulo, Enel million (€307 million at the end of 2018), and non-monetary Distribuição Ceará, Enel Distribuição Goiás, and Enel Distri- grants to be received in respect of green certificates totaling buição Rio. €37 million (€50 million at December 31, 2018). The Brazilian court has upheld the complaint filed by the com- The change for the year mainly reflects the tax receivables re- panies, according to which the additional ICMS tax must not cognized by Enel Distribuição São Paulo and Enel Distribuição be included in the tax base for PIS and COFINS. The federal Ceará related to the PIS/COFINS dispute in Brazil. government has filed an appeal of this ruling. The PIS (Program of Social Integration) and COFINS (Contri- In 2019, Enel Distribuição São Paulo and Enel Distribuição bution for the Financing of Social Security) are federal contri- Ceará were notified of the ruling that acknowledges the full butions that pay companies in Brazil with the goal of funding deductibility of ICMS for the purposes of calculating PIS and programs for employees, public health, social services, and COFINS for the periods between December 2013 and De- social security by applying tax rates on the gross revenue of cember 2014 for Enel Distribuição São Paulo and from May each company. The ICMS (Tax on Commerce and Services) is 2001 onward for Enel Distribuição Ceará. 248 Consolidated Annual Report 201928. Inventories - €2,531 million Millions of euro Raw materials, consumables and supplies: - fuels - materials, equipment and other inventories Total Environmental certificates: - CO2 emissions allowances - green certificates - white certificates Total Buildings held for sale Payments on account TOTAL at Dec. 31, 2019 at Dec. 31, 2018 Change 857 1,493 2,350 96 12 1 109 54 18 1,260 1,345 2,605 119 16 - 135 57 21 (403) 148 (255) (23) (4) 1 (26) (3) (3) 2,531 2,818 (287) -32.0% 11.0% -9.8% -19.3% -25.0% - -19.3% -5.3% -14.3% -10.2% Raw materials, consumables and supplies consist of materi- The overall decrease in inventories for the year (€287 million) als and equipment used to operate, maintain, and construct is mainly attributable to the impairment of inventories of fuel, power plants and distribution networks, as well as fuel inven- materials and spare-parts (€308 million) associated with the tories to cover the company’s requirements for generation coal-fired plants subject to impairment in Italy and Spain. and trading activities. 29. Trade receivables - €13,083 million Millions of euro Customers: - electricity sales and transport - distribution and sale of gas - other assets Total customer receivables Trade receivables due from associates and joint arrangements TOTAL at Dec. 31, 2019 at Dec. 31, 2018 Change 8,532 1,284 3,014 12,830 253 13,083 8,556 1,145 3,687 13,388 199 13,587 (24) 139 (673) (558) 54 (504) -0.3% 12.1% -18.3% -4.2% 27.1% -3.7% Trade receivables from customers are recognized net of al- the sale and transport of electricity, to an increase in write- lowances for doubtful accounts, which totaled €2,980 million downs and to ordinary developments in receivables. at the end of the year, compare with a balance of €2,828 mil- For more information on trade receivables, see note 43 “Fi- lion at the end of the previous year. Specifically, the reduction nancial instruments”. for the period was mainly due to a decline in receivables for 249 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements30. Other current financial assets - €4,305 million Millions of euro Current financial assets included in net financial debt (see note 30.1) Other Total at Dec. 31, 2019 at Dec. 31, 2018 Change 4,158 147 4,305 5,003 157 5,160 (845) (10) (855) -16.9% -6.4% -16.6% 30.1 Other current financial assets included in net financial debt - €4,158 million Millions of euro Short-term portion of long-term financial receivables Securities at FVOCI Financial receivables and cash collateral Other Total at Dec. 31, 2019 at Dec. 31, 2018 Change 1,585 61 2,153 359 4,158 1,522 72 2,559 850 5,003 63 (11) (406) (491) (845) 4.1% -15.3% -15.9% -57.8% -16.9% The change in this item is mainly due to the following: > a decrease in “Other” due primarily to the payment of the > a reduction of €406 million in financial receivables and cash financial receivable recognized by Enel Finance Interna- collateral due to the decline in cash collateral paid to coun- tional in 2018 in respect of the renewables companies of terparties for transactions in over-the-counter derivative on Mexico, which are accounted for using the equity method. interest rates and exchange rates; 31. Other current assets - €3,115 million Millions of euro Receivables from institutional market operators Advances to suppliers Receivables due from employees Other receivables Sundry tax receivables Accrued operating income and prepaid expenses Total at Dec. 31, 2019 at Dec. 31, 2018 Change 732 314 28 1,084 797 160 3,115 745 299 30 1,139 622 148 2,983 (13) 15 (2) (55) 175 12 132 -1.7% 5.0% -6.7% -4.8% 28.1% 8.1% 4.4% Receivables from institutional market operators include re- Other receivables decreased mainly due to the collection of ceivables in respect of the Italian system in the amount of the receivable deriving from the sale of the eight renewable €450 million (€526 million at December 31, 2018) and the companies in Mexico last year. This effect is partially offset by Spanish system in the amount of €254 million (€185 million at the recognition of contingent assets following the sale of a December 31, 2018). number of companies in North America. The increase of €175 million in sundry tax receivables is main- ly attributable to a reclassification of tax receivables of Enel Distribuição São Paulo to short term. 250 Consolidated Annual Report 201932. Cash and cash equivalents - €9,029 million Cash and cash equivalents, detailed in the table below, are essentially in respect of deposits pledged to secure tran- not restricted by any encumbrances, apart from €72 million sactions carried out. Millions of euro Bank and postal deposits Cash and cash equivalents on hand Other investments of liquidity Total at Dec. 31, 2019 at Dec. 31, 2018 Change 7,910 87 1,032 9,029 5,531 328 771 6,630 2,379 (241) 261 2,399 43.0% -73.5% 33.9% 36.2% 33. Assets and disposal groups classified as held for sale - €101 million and €3 million Changes in assets held for sale during 2019 can be broken down as follows. Millions of euro Property, plant and equipment Intangible assets Goodwill Investments accounted for using the equity method Other non-current assets Cash and cash equivalents Inventories, trade receivables, and other current assets Total Changes in liabilities in 2019 were as follows: Millions of euro Long-term borrowings Provisions for risks and charges (non-current portion) Other non-current liabilities Short-term borrowings Other current financial liabilities Trade payables and other current liabilities Total Reclassification from/to current and non-current assets Disposals and changes in the scope of consolidation at Dec. 31, 2018 Impairment losses Other changes at Dec. 31, 2019 611 5 23 - 1 21 27 688 413 13 - 80 - - - (879) (7) (23) - (1) (33) (22) (124) (6) - - - - - 506 (965) (130) (7) 2 - - - 12 (5) 2 14 7 - 80 - - - 101 Disposals and changes in the scope of consolidation at Dec. 31, 2018 Other changes at Dec. 31, 2019 99 1 5 284 2 16 407 (100) (2) (2) - (1) (11) (116) 1 1 - (284) (1) (5) (288) - - 3 - - - 3 Assets and liabilities held for sale at December 31, 2019, the- mainly regard the value of a number of hydro shareholdin- refore amount to €101 million and €3 million respectively and gs measured using the equity method and held by EGPNA 251 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements(now Enel North America) and the Rionegro plant in Colom- sue, among other things, the purposes of the 2019 LTI Plan. bia, which, following decisions by management, meet the re- On 19 September the Company’s Board of Directors, in im- quirements of IFRS 5 for classification within this aggregate. plementation of the authorization granted and in compliance The change for the period essentially concerns the sale of a with the related terms already announced to the market, ap- number of renewable energy companies in Brazil that were proved the start of a treasury share purchase program, for a previously classified as held for sale and the Reftinskaya maximum amount of €10.5 million and for a number of shares GRES plant, which was classified in this aggregate in 2019 not exceeding 2.5 million (the “Program”), equal to about and sold in the 4th Quarter of 2019. 0.02% of Enel’s share capital. Over the duration of the Program (September 23, 2019 - De- cember 2, 2019) the Company purchased 1,549,152 Enel shares at the weighted average price of €6.7779 per share. Other reserves - €1,139 million Share premium reserve - €7,487 million Pursuant to Article 2431 of the Italian Civil Code, the share premium reserve contains, in the case of the issue of shares at a price above par, the difference between the issue price of the shares and their par value, including those resulting from conversion from bonds. The reserve, which is a capital reserve, may not be distributed until the legal reserve has reached the threshold established under Article 2430 of the Italian Civil Code. Legal reserve - €2,034 million The legal reserve is formed of the part of net income that, pursuant to Article 2430 of the Italian Civil Code, cannot be distributed as dividends. Other reserves - €2,262 million These include €2,215 million related to the remaining portion of the value adjustments carried out when Enel was trans- formed from a public entity to a joint-stock company. Pursuant to Article 47 of the Uniform Income Tax Code (Testo Unico Imposte sul Reddito, or “TUIR”), this amount does not constitute taxable income when distributed. Reserve from translation of financial statements in cur- rencies other than euro - €(3,802) million The decrease for the year, of €485 million, was mainly due to the net strengthening of the functional currency against the foreign currencies used by subsidiaries and the change in the scope of consolidation connected with the purchase of 5.74% of Enel Américas. 34. Shareholders’ equity - €46,938 million 34.1 Equity attributable to the shareholders of the Parent Company - €30,377 million Share capital - €10,167 million At December 31, 2019, the fully subscribed and paid-up share capital of Enel SpA totaled €10,166,679,946, represented by the same number of ordinary shares with a par value of €1.00 each. Share capital is unchanged compared with that regis- tered at December 31, 2018. At December 31, 2019, based on the shareholders register and the notices submitted to CONSOB and received by the Company pursuant to Article 120 of Legislative Decree 58 of February 24, 1998, as well as other available information, shareholders with an interest of greater than 3% in the Com- pany’s share capital included the Ministry for the Economy and Finance (with a 23.585% stake) and Capital Research and Management Company (which held a direct interest of 5.029% at October 11, 2019 for asset management purpos- es). Treasury share reserve - €(1) million As at December 31, 2019, treasury shares are represented by 1,549,152 ordinary shares of Enel SpA with a par value of €1.00 each, purchased through a qualified intermediary for a total value of €10 million. On May 16, 2019, the Shareholders’ Meeting approved the long-term incentive plan for 2019 (“2019 LTI Plan” or “Plan”) intended for the management of Enel SpA and/or its subsid- iaries pursuant to Article 2359 of the Civil Code, granting the Board of Directors all the powers necessary to implement the Plan. On the same date, the Shareholders’ Meeting also authorized the Board of Directors to purchase treasury shares, in compli- ance with the time limits established by the resolution, to pur- 252 Consolidated Annual Report 2019Reserve from measurement of cash flow hedge financial > the effects of the merger into Enel Américas of Endesa instruments - €(1,610) million Américas and Chilectra Américas; This includes the net charges recognized in equity from the > the disposal to third parties of a minority interest without measurement of cash flow hedge derivatives. The cumulative loss of control in Enel Green Power North America Renew- tax effect is equal to €431 million. able Energy Partners and a number of companies in South Africa. Reserve from measurement of costs of hedging financial The reserve did not change in 2019. instruments - €(147) million As of January 1, 2018, in application of IFRS 9, these reserves Reserve from acquisitions of non-controlling interests - include the change in fair value of currency basis points and €(1,572) million forward points. The cumulative tax effect is equal to €6 mil- This reserve mainly includes the surplus of acquisition prices lion. with respect to the carrying value of the equity acquired fol- lowing the acquisition from third parties of further interests Reserve from measurement of financial instruments at in companies already controlled in Latin America and in Italy FVOCI - €21 million (Enel Green Power SpA). This includes net unrealized income from the measurement The change for the period mainly reflects the effects of: at fair value of financial assets. > the increase of 5.74% in the interest held in Enel Améri- The cumulative tax effect is equal to a negative €3 million. cas under the provisions of the share swap contracts en- tered into with a financial institution, raising that stake to Reserve from equity investments accounted for using the 59.97%; equity method - €(119) million > the increase of 4.1% in the interest held in Eletropaulo The reserve reports the share of comprehensive income to Metropolitana Eletricidade de São Paulo SA; be recognized directly in equity of companies accounted for > the increase of 0.11% in the interest held in Enel Chile using the equity method. The cumulative tax effect is equal under the provisions of the share swap contracts entered to €25 million. into with a financial institution; > the increase of 23.44% in the interest held in Enel Green Reserve from remeasurement of net liabilities/(assets) of Power India, raising that stake to 100%. defined benefit plans - €(1,043) million This reserve includes all actuarial gains and losses, net of tax effects. The change is mainly attributable to the decrease in net actuarial losses recognized during the period, mainly re- flecting changes in the discount rate. The cumulative tax ef- Retained earnings and loss carried forward - €19,081 million This reserve reports earnings from previous years that have fect is equal to €244 million. not been distributed or allocated to other reserves. Reserve from disposal of equity interests without loss of control - €(2,381) million This item mainly reports: > the gain posted on the public offering of Enel Green Power shares, net of expenses associated with the disposal and the related taxation; > the sale of minority interests recognized as a result of the Enersis (now Enel Américas and Enel Chile) capital increase; > the capital loss, net of expenses associated with the dis- posal and the related taxation, from the public offering of 21.92% of Endesa; > the income from the disposal of the minority interest in Enel Green Power North America Renewable Energy Part- ners; 253 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsThe table below shows the changes in gains and losses recognized directly in other comprehensive income, including non-con- trolling interests, with specific reporting of the related tax effects. Millions of euro Reserve from translation of financial statements in currencies other than euro Reserve from measurement of cash flow hedge financial instruments Reserves from measurement of costs of hedging financial instruments Reserve from measurement of financial instruments at FVOCI Share of OCI of associates accounted for using the equity method Reserves from measurement of equity investments in other companies Remeasurements of net liabilities/(assets) of defined benfit plans Total gains/(losses) recognized in equity 34.2 Dividends Dividends paid in 2018 Dividends for 2017 Interim dividends for 2018 (1) Special dividends Total dividend paid in 2018 Dividends paid in 2019 Dividends for 2018 Interim dividends for 2019 (2) Special dividends Total dividend paid in 2019 at Dec. 31, 2018 Of which shareholders of the Parent Company Total Of which non-controlling interests Gains/(Losses) recognized in equity for the year Released to income statement (6,709) (3,206) (3,503) (481) - (2,007) (1,721) (286) (2,036) 2,141 (265) (4) (109) (258) (3) (112) (11) (11) (7) (1) 3 - 150 7 (60) - (973) (727) (246) (702) (36) - - - - (10,078) (6,038) (4,040) (3,122) 2,105 Taxes - (66) 6 (2) 3 - 200 141 Change Of which shareholders of the Parent Company (265) Of which non-controlling interests at Dec. 31, 2019 Of which shareholders of the Parent Company Of which non-controlling interests (3,471) (3,719) (1,968) (1,627) (341) Total (481) 39 120 (57) 5 - (502) (876) 94 111 (56) 5 - (318) (429) (216) (55) 9 - - (1) (184) (447) Total (7,190) (145) 1 (166) (11) (1,475) (10,954) (147) 2 (168) (11) (1,045) (6.467) (1) 2 2 - (430) (4.487) Amount distributed (millions of euro) Dividend per share (euro) 2,410 - - 2,410 2,847 - - 2,847 0.24 - - 0.24 0.28 - - 0.28 (1) Approved by the Board of Directors on November 6, 2018, and paid as from January 23, 2019 (interim dividend of €0.14 per share for a total of €1,423 million). (2) Approved by the Board of Directors on November 12, 2019, and paid as from January 22, 2020 (interim dividend of €0.16 per share for a total of €1,627 million). The dividend for 2019, equal to €0.328 per share, for a to- ments do not take account of the effects of the distribution to tal amount of €3,334 million (of which €0.16 per share, for a shareholders of the dividend for 2019, except for the liability total of €1,626 million, already paid as an interim dividend), in respect of shareholders for the interim dividend for 2019 has been proposed to and resolved by the Shareholders’ dividend, which was approved by the Board of Directors on Meeting of May 14, 2020 at single call. These financial state- November 12, 2019 for a potential maximum of €1,627 mil- 254 Consolidated Annual Report 2019The table below shows the changes in gains and losses recognized directly in other comprehensive income, including non-con- trolling interests, with specific reporting of the related tax effects. Millions of euro Reserve from translation of financial statements in currencies other than euro Reserve from measurement of cash flow hedge financial instruments Reserves from measurement of costs of hedging financial instruments Reserve from measurement of financial instruments at FVOCI Share of OCI of associates accounted for using the equity method Reserves from measurement of equity investments in other companies Remeasurements of net liabilities/(assets) of defined benfit plans in equity Total gains/(losses) recognized 34.2 Dividends Dividends paid in 2018 Dividends for 2017 Interim dividends for 2018 (1) Special dividends Total dividend paid in 2018 Dividends paid in 2019 Dividends for 2018 Interim dividends for 2019 (2) Special dividends Total dividend paid in 2019 at Dec. 31, 2018 Of which shareholders of the Parent non-controlling Total Company interests (6,709) (3,206) (3,503) Of which Gains/(Losses) recognized in equity for the Released to income statement Taxes (2,007) (1,721) (286) (2,036) 2,141 (66) 150 (36) (265) (4) (109) (258) (3) (112) (11) (11) (7) (1) 3 - - - - - - (973) (727) (246) (702) (10,078) (6,038) (4,040) (3,122) 2,105 Change Of which shareholders of the Parent Company (265) 94 111 5 (56) - (318) (429) Of which non-controlling interests (216) (55) 9 - (1) - (184) (447) Total (481) 39 120 5 (57) - (502) (876) at Dec. 31, 2019 Of which shareholders of the Parent Company Of which non-controlling interests (3,471) (3,719) Total (7,190) (1,968) (1,627) (341) (145) 1 (166) (11) (1,475) (10,954) (147) 2 (168) (11) (1,045) (6.467) 2 (1) 2 - (430) (4.487) Amount distributed (millions of euro) Dividend per share lion, and paid as from January 22, 2020 net of the portion In particular, the Group seeks to maintain an adequate cap- pertaining to the 1,549,152 million treasury shares held as at italization that enables it to achieve a satisfactory return for the record date of January 21, 2020. shareholders and ensure access to external sources of financ- Capital management The Group’s objectives for managing capital comprise safe- In this context, the Group manages its capital structure and adjusts that structure when changes in economic conditions guarding the business as a going concern, creating value for so require. There were no substantive changes in objectives, stakeholders and supporting the development of the Group. policies or processes in 2019. ing, in part by maintaining an adequate rating. year (481) (60) 7 - 2,410 - - - - 2,410 2,847 2,847 - 6 3 - (2) 200 141 (euro) 0.24 - - - - 0.24 0.28 0.28 (1) Approved by the Board of Directors on November 6, 2018, and paid as from January 23, 2019 (interim dividend of €0.14 per share for a total of €1,423 million). (2) Approved by the Board of Directors on November 12, 2019, and paid as from January 22, 2020 (interim dividend of €0.16 per share for a total of €1,627 million). 255 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsTo this end, the Group constantly monitors developments in cember 31, 2019 and 2018, is summarized in the following the level of its debt in relation to equity. The situation at De- table. Millions of euro Non-current financial position Net current financial position Non-current financial receivables and long-term securities Net financial debt Equity attributable to the shareholders of the Parent Company Non-controlling interests Shareholders’ equity Debt/equity ratio at Dec. 31, 2019 at Dec. 31, 2018 54,174 (5,815) (3,184) 45,175 30,377 16,561 46,938 0.96 48,983 (4,622) (3,272) 41,089 31,720 16,132 47,852 0.86 Change 5,191 (1,193) 88 4,086 (1,343) 429 (914) - The percentage increase in the use of debt is attributable to and the acquisition of control of a number of companies from the increase in net financial debt, mainly reflecting the fun- the EGPNA REP joint venture. ding requirements of investment in the period, the recogni- tion of a liability following the first-time application of IFRS 16 See note 41 for a breakdown of the individual items in the table. 34.3 Non-controlling interests - €16,561 million The following table reports the composition of non-controlling interests by geographic area. Millions of euro Italy Iberia Latin America Europe and Euro-Mediterranean Affairs North America Africa, Asia and Oceania Total Non-controlling interests Net income attributable to non-controlling interests at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 1 5,961 9,277 903 222 197 7 6,405 8,406 908 181 225 (2) 36 1,256 6 (1) 7 - 386 1,095 68 4 8 16,561 16,132 1,302 1,561 Finally, note that with effect from September 2019, Latin In order to ensure full comparability of the figures in the li- America also includes the countries Panama, Costa Rica, ght of the new organization, the comparative figures for 2018 Guatemala, El Salvador and Nicaragua, which were previously have been restated appropriately. reported under the geographic area North and Central Ameri- ca (now renamed North America). 35. Borrowings Millions of euro Long-term borrowings Short-term borrowings Total Non-current Current at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 54,174 - 54,174 48,983 - 48,983 3,409 3,917 7,326 3,367 3,616 6,983 For more information on the nature of borrowings, see note 43 “Financial instruments”. 256 Consolidated Annual Report 201936. Employee benefits - €3,771 million The Group provides its employees with a variety of benefits, fit plans and benefits are fully ensured, with the exception including deferred compensation benefits, additional months’ of the former plan for benefits in the event of the death of pay for having reached age limits or eligibility for old-age pen- a retired employee. Finally, the Brazilian companies have sion, loyalty bonuses for achievement of seniority milestones, also established defined benefit plans; supplemental retirement and healthcare plans, residential > the item “electricity discount” comprises benefits regar- electricity discounts and similar benefits. More specifically: ding electricity supply associated with foreign companies. > for Italy, the item “pension benefits” regards estimated For Italy, that benefit, which was granted until the end of accruals made to cover benefits due under the supple- 2015 to retired employees only, was unilaterally cancelled; mental retirement schemes of retired executives and the > the item “health insurance” reports benefits for current or benefits due to personnel under law or contract at the time retired employees covering medical expenses; the employment relationship is terminated. For the forei- > “other benefits” mainly regard the loyalty bonus, which is gn companies, the item reports post-employment benefi- adopted in various countries and for Italy is represented by ts, of which the most material regard the pension benefit the estimated liability for the benefit entitling employees schemes of Endesa in Spain, which break down into three covered by the electricity workers national collective bar- types that differ on the basis of employee seniority and gaining agreement to a bonus for achievement of seniority company. In general, under the framework agreement of milestones (25th and 35th year of service). It also includes October 25, 2000, employees participate in a specific defi- other incentive plans, which provide for the award to cer- ned-contribution pension plan and, in cases of disability or tain Company managers of a monetary bonus subject to death of employees in service, a defined benefit plan whi- specified conditions. ch is covered by appropriate insurance policies. In addition, the group has two other limited-enrollment plans (i) for cur- The following table reports changes in the defined benefit rent and retired Endesa employees covered by the electri- obligation for post-employment and other long-term em- city industry collective bargaining agreement prior to the ployee benefits at December 31, 2019, and December 31, changes introduced with the framework agreement noted 2018, respectively, as well as a reconciliation of that obligation earlier and (ii) for employees of the former Catalan compa- with the actuarial liability. nies (Fecsa/Enher/HidroEmpordà). Both are defined bene- 257 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsMillions of euro 2019 2018 Pension benefits Electricity discount Health insurance Other benefits Total Pension benefits Electricity discount Health insurance Other benefits CHANGES IN ACTUARIAL OBLIGATION Actuarial obligation at the start of the year 5,072 Current service cost Interest expense Actuarial (gains)/losses arising from changes in demographic assumptions Actuarial (gains)/losses arising from changes in financial assumptions Experience adjustments Past service cost (Gains)/Losses arising from settlements Exchange differences Employer contributions Employee contributions Benefits paid Other changes Liabilities classified as held for sale Actuarial obligation at year end (A) CHANGES IN PLAN ASSETS Fair value of plan assets at the start of the year Interest income Expected return on plan assets excluding amounts included in interest income Exchange differences Employer contributions Employee contributions Benefits paid Other payments Changes in the scope of consolidation Fair value of plan assets at year-end (B) EFFECT OF ASSET CEILING Asset ceiling at the start of the year Interest income Changes in asset ceiling Exchange differences Changes in the scope of consolidation Asset ceiling at year end (C) 20 335 (16) 701 94 (8) - (84) - 2 (431) 6 - 5,691 3,160 235 272 (50) 186 2 (431) - - 3,374 24 2 20 (1) - 45 767 4 15 - 91 55 - - - - - (31) 3 - 904 - - - - 31 - (31) - - - - - - - - - 253 4 10 1 15 (4) - - (2) - - (14) - - 263 - - - - 14 - (14) - - - - - - - - - 231 32 5 - 8 13 2 - 1 - - (45) (5) - 242 - - - - 16 - (16) - - - - - - - - - 6,323 60 365 (15) 815 158 (6) - (85) - 2 (521) 4 - 7,100 3,160 235 272 (50) 247 2 (492) - - 3,374 24 2 20 (1) - 45 Net liability in balance sheet (A-B+C) 2,362 904 263 242 3,771 767 253 231 258 2 - - - 2,413 16 247 (2) 213 21 (1) (114) (370) 2,647 5,072 1,317 173 70 (82) 171 (370) 2 - 1,879 3,160 (38) 64 4 (6) - 24 1,936 739 4 14 (10) 48 (1) (30) 3 - 767 30 (30) - - - - - - - - - - - - - - - - - - - 253 5 10 - 4 2 (9) (12) 253 12 -- (12) - - - - - - - - - - - - - - - - - - 254 36 (5) 5 - 7 7 - (6) (65) (2) 231 24 (24) - - - - - - - - - - - - - - - - - Total 3,659 61 276 (2) 202 78 6 - - 2 - (130) (477) 2,648 6,323 1,317 173 70 (82) 237 (436) 2 - 1,879 3,160 64 4 (38) (6) - 24 3,187 Consolidated Annual Report 2019Millions of euro 2018 Pension benefits Health insurance Other benefits Total Pension benefits Electricity discount Health insurance Other benefits 2,413 16 247 (2) 213 21 (1) - (114) - 2 (370) 2,647 - 5,072 1,317 173 70 (82) 171 2 (370) - 1,879 3,160 64 4 (38) (6) - 24 1,936 739 4 14 - (10) 48 - - (1) - - (30) 3 - 767 - - - - 30 - (30) - - - - - - - - - 253 5 10 - 4 2 - - (9) - - (12) - - 253 - - - - 12 -- (12) - - - - - - - - 254 36 5 - (5) 7 7 - (6) - - (65) (2) - 231 - - - - 24 - (24) - - - - - - - - - 767 253 231 CHANGES IN ACTUARIAL OBLIGATION Actuarial obligation at the start of the year 5,072 2019 Electricity discount Current service cost Interest expense Actuarial (gains)/losses arising from changes in demographic assumptions Actuarial (gains)/losses arising from changes in (Gains)/Losses arising from settlements financial assumptions Experience adjustments Past service cost Exchange differences Employer contributions Employee contributions Benefits paid Other changes Liabilities classified as held for sale Actuarial obligation at year end (A) CHANGES IN PLAN ASSETS Fair value of plan assets at the start of the year Interest income Expected return on plan assets excluding amounts included in interest income Exchange differences Employer contributions Employee contributions Benefits paid Other payments EFFECT OF ASSET CEILING Asset ceiling at the start of the year Interest income Changes in asset ceiling Exchange differences Changes in the scope of consolidation Asset ceiling at year end (C) 20 335 (16) 701 94 (8) (84) - - 2 6 - 2 - - (431) 5,691 3,160 235 272 (50) 186 (431) 24 2 20 (1) - 45 Changes in the scope of consolidation Fair value of plan assets at year-end (B) 3,374 767 4 15 91 55 (31) 3 - 904 31 (31) - - - - - - - - - - - - - - - - - - - - 253 4 10 1 15 (4) (2) (14) 263 14 (14) - - - - - - - - - - - - - - - - - - - - 231 32 13 5 - 8 2 - 1 - - (45) (5) 242 16 (16) - - - - - - - - - - - - - - - 6,323 60 365 (15) 815 158 (6) (85) - - 2 4 - 2 - - (521) 7,100 3,160 235 272 (50) 247 (492) 3,374 24 2 20 (1) - 45 Net liability in balance sheet (A-B+C) 2,362 904 263 242 3,771 Total 3,659 61 276 (2) 202 78 6 - (130) - 2 (477) 2,648 - 6,323 1,317 173 70 (82) 237 2 (436) - 1,879 3,160 64 4 (38) (6) - 24 3,187 259 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsMillions of euro (Gains)/Losses charged to profit or loss Service cost and past service cost Net interest expense (Gains)/Losses arising from settlements Actuarial (gains)/losses on other long-term benefits Other changes Total Millions of euro Change in (gains)/losses in OCI Expected return on plan assets excluding amounts included in interest income Actuarial (gains)/losses on defined benefit plans Changes in asset ceiling excluding amounts included in interest income Other changes Total 2019 32 129 - 25 - 186 2019 (272) 958 20 (4) 702 2018 39 107 - 28 (4) 170 2018 (70) 282 (38) (2) 172 The change in cost recognized through profit or loss was The liability recognized in the balance sheet at the end of the equal to €16 million. The impact on the income statement is, year is reported net of the fair value of plan assets, amounting therefore, greater than in 2018, due mainly to the effect of to €3,374 million at December 31, 2019. Those assets, which interest on pension funds for Enel Distribuição São Paulo in are entirely in Spain and Brazil, break down as follows. 2019 8% 68% 3% - - 21% 100% 2018 8% 65% 4% - - 23% 100% Brazil. Investments quoted in active markets Equity instruments Fixed-income securities Investment property Other Unquoted investments Assets held by insurance undertakings Other Total 260 Consolidated Annual Report 2019The main actuarial assumptions used to calculate the liabi- which are consistent with those used the previous year, are lities in respect of employee benefits and the plan assets, set out in the following table. Italy Iberia Latin America Other countries Italy Iberia Latin America Other countries 2019 2018 Discount rate 0.00%-0.70% 0.00%-1.14% 3.40%-7.59% 1.20%-6.45% 0.25%-1.50% 0.21%-1.75% 4.70%-9.15% 1.50%-8.77% Inflation rate 0.70% 2.00% 3.00%-8.00% 1.00%-3.94% 1.50% 2.00% 3.00%-4.00% 1.50%-4.14% Rate of wage increases Rate of increase in healthcare costs Expected rate of return on plan assets 0.70%-1.70% 2.00% 3.80%-8.00% 2.50%-3.94% 0.025 % 2.00% 3.80%-5.00% 3.00%-4.20% 1.70% 3.20% 7.12%-8.00% - 1.09% 6.44%-7.38% - - 2.50% 3.20% 7.12%-8.00% - 1.75% 8.63%-9.04% - - The following table reports the outcome of a sensitivity analy- gation of changes reasonably possible at the end of the year sis that demonstrates the effects on the defined benefit obli- in the actuarial assumptions used in estimating the obligation. Pension benefits Electricity discount Health insurance Other benefits Pension benefits Electricity discount Health insurance Other benefits at Dec. 31, 2019 at Dec. 31, 2018 321 (285) (2) 31 19 9 - 179 78 (73) (74) 79 2 (2) - 36 15 (19) (5) 10 (2) (3) 12 19 5 (7) (3) 1 5 (1) - (1) 280 (243) (5) 32 10 11 - 155 63 (59) (59) 61 (2) (2) - 25 9 (12) (3) 3 (3) (3) 32 8 3 (9) (6) 2 1 (3) - (3) Millions of euro Decrease of 0.5% in discount rate Increase of 0.5% in discount rate Increase of 0.5% in inflation rate Decrease of 0.5% in inflation rate Increase of 0.5% in remuneration Increase of 0.5% in pensions currently being paid Increase of 1% healthcare costs Increase of 1 year in life expectancy of active and retired employees The sensitivity analysis used an approach that extrapolates The contributions expected to be paid into defined benefit the effect on the defined benefit obligation of reasonable plans in the subsequent year amount to €177 million. changes in an individual actuarial assumption, leaving the other assumptions unchanged. The following table reports expected benefit payments in the coming years for defined benefit plans. Millions of euro Within 1 year In 1-2 years In 2-5 years More than 5 years at Dec. 31, 2019 at Dec. 31, 2018 461 447 1,288 2,040 436 429 1,273 2,017 261 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements37. Provisions for risks and charges - €6,520 million Millions of euro Provision for litigation, risks and other charges: - nuclear decommissioning - retirement, removal and site restoration - litigation - environmental certificates - taxes and duties - other Total Provision for early retirement incentives TOTAL Millions of euro Accrual Reversal Utilization at Dec. 31, 2018 Provision for litigation, risks and other charges: - nuclear decommissioning - retirement, removal and site restoration 552 - - - 1,057 64 (21) (41) - litigation 1,506 278 (168) (582) - environmental certificates - taxes and duties - other Total Provision for early retirement incentives 27 432 1,345 4,919 36 31 302 711 (18) (20) (90) (13) (109) (295) (317) (1,040) 1,574 79 (13) (437) at Dec. 31, 2019 at Dec. 31, 2018 Non-current Current Non-current Current 640 1,840 938 - 312 762 4,492 832 5,324 - 102 132 33 24 504 795 401 1,196 552 986 1,315 - 409 742 4,004 1,177 5,181 - 71 191 27 23 603 915 397 1,312 Provisions for retirement and site restoration Unwinding of interest Change in the scope of consolidation Translation adjustment Other changes Reclassifications of liabilities held for sale at Dec. 31, 2019 - - - - - - - - - 640 1,942 1,070 33 336 1,266 5,287 1,233 6,520 - 2 - - - 3 5 - 5 - - (8) (7) (16) - (2) (41) (67) - 1 (1) (10) (17) - (6) (67) (23) 5 16 52 - 5 39 117 36 83 880 - - - 13 976 - TOTAL 6,493 790 (330) (1,477) 153 976 262 Consolidated Annual Report 2019Nuclear decommissioning provision At December 31, 2019, the provision reflected solely the costs Provision for environmental certificates The provision for environmental certificates covers costs in that will be incurred at the time of decommissioning of nucle- respect of shortfalls in the environmental certificates need ar plants by Endesa, a Spanish public enterprise responsible for compliance with national or supranational environmental for such activities in accordance with Royal Decree 1349/2003 protection requirements and mainly regards Enel Energia. and Law 24/2005. Quantification of the costs is based on the standard contract between Endesa and the electricity compa- nies approved by the Ministry for the Economy in September 2001, which regulates the retirement and closing of nuclear Provision for charges in respect of taxes and duties The provision for charges in respect of taxes and duties re- power plants. The time horizon envisaged, three years, corre- ports the estimated liability deriving from tax disputes con- sponds to the period from the termination of power genera- cerning direct and indirect taxes. The balance of the provision tion to the transfer of plant management to Endesa (so-called also includes the provision for current and potential disputes post-operational costs) and takes account, among the various concerning local property tax (whether the Imposta Comu- assumptions used to estimate the amount, the quantity of nale sugli Immobili (“ICI”) or the new Imposta Municipale unused nuclear fuel expected at the date of closure of each Unica (“IMU”)) in Italy. The Group has taken due account of of the Spanish nuclear plants on the basis of the provisions of the criteria introduced with circular no. 6/2012 of the Public the concession agreement. Non-nuclear plant retirement and site restoration provision The provision for non-nuclear plant retirement and site res- Land Agency (which resolved interpretive issues concerning the valuation methods for movable assets considered rele- vant for property registry purposes, including certain assets typical to generation plants, such as turbines) in estimating the liability for such taxes, both for the purposes of quantify- toration represents the present value of the estimated cost ing the probable risk associated with pending litigation and for the retirement and removal of non-nuclear plants where generating a reasonable valuation of probable future charges there is a legal or constructive obligation to do so. The provi- on positions that have not yet been assessed by Land Agency sion mainly regards the Endesa Group, Enel Produzione and offices and municipalities. the companies in Latin America. The increase in the provision The decrease compared with the previous year, equal to €96 in 2019 reflects the Group’s decision to promote the halt in million, mainly reflects uses, primarily in Spain and Italy. generation with coal-fired plants, which prompted an increase in provisions for plant retirement charges for the Bocamina I and Tarapacá plants in Chile and of a number of plants in Italy and Spain. Other provisions Other provisions cover various risks and charges, mainly in connection with regulatory disputes and disputes with local authorities regarding various duties and fees or other charges. Litigation provision The litigation provision covers contingent liabilities in respect The decrease of €79 million for the year is mainly attributable to the reversal of part of the provision allocated by e-distribu- of pending litigation and other disputes. It includes an esti- tion to manage claims by self-generators following the expi- mate of the potential liability relating to disputes that arose ry of the deadline for submitting claims, and the use of the during the period, as well as revised estimates of the poten- provision following the agreement between Edesur and local tial costs associated with disputes initiated in prior periods. authorities to settle reciprocal outstanding claims originated The balance for litigation mainly regards the companies in in 2006-2016, partly offset by an increase in provisions for en- Spain (€144 million), Italy (€144 million) and Latin America vironmental charges recognized by Enel Produzione. (€723 million). The change in the scope of consolidation is attributable to the The decrease compared with the previous year, equal to €436 acquisition of YouSave SpA. million, mainly reflects the change in the provision in Latin America and Iberia, attributable in particular to the resolution of the dispute of Enel Distribuição São Paulo with Electrobras and a number of disputes of Edistribución Redes Digitales SL Provision for early retirement incentives The provision for early retirement incentives includes the esti- (the former Endesa Distribución Eléctrica). mated charges related to binding agreements for the volun- tary termination of employment contracts in response to or- 263 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsganizational needs. The reduction of €341 million for the year In Spain, the provisions regard the expansion, in 2015, of reflects, among other factors, uses for incentive provisions the Acuerdo de Salida Voluntaria (ASV) introduced in Spain in established in Spain and Italy in previous years. 2014. The ASV mechanism was agreed in Spain in connection In Italy, the latter is largely associated with the union-com- with Endesa’s restructuring and reorganization plan, which pany agreements signed in September 2013 and December provides for the suspension of the employment contract with 2015, implementing, for a number of companies in Italy, the tacit annual renewal. With regard to that plan, on December mechanism provided for under Article 4, paragraphs 1-7 ter, of 30, 2014, the company had signed an agreement with union Law 92/2012 (the Fornero Act). The latter agreement envisag- representatives in which it undertook to not exercise the op- es the voluntary termination, in Italy, of about 6,100 employ- tion to request a return to work at subsequent annual renewal ees in 2016-2020. dates for the employees participating in the mechanism. 38. Other non-current liabilities - €3,706 million Millions of euro Accrued operating expenses and deferred income Other items Total at Dec. 31, 2019 at Dec. 31, 2018 Change 552 3,154 3,706 484 1,417 1,901 68 1,737 1,805 14.0% - 95.0% The increase in “Other items” of €1,737 million is essentially es, similar to VAT). It also reflects the closure of the dispute due to liabilities to customers in Brazil amounting to €1,278 between Enel Distribuição São Paulo and Eletrobras, which million recognized against “other non-current assets” follow- involved the use of the provision for risks and charges in re- ing the first-level ruling on disputes brought by distribution spect of other non-current liabilities amounting to €297 mil- companies against local authorities to request the elimination lion, as well as €73 million recognized under other current of double taxation in the application of the PIS and COFINS liabilities. taxes on ICMS (tax on the circulation of goods and servic- 39. Trade payables - €12,960 million The item amounted to €12,960 million (€13,387 million in More specifically, trade payables falling due in less than 12 2018) and includes payables in respect of electricity supplies, months amounted to €12,322 million (€12,718 million in fuel, materials, equipment associated with tenders, and oth- 2018), while those with falling due in more than 12 months er services. amounted to €638 million (€669 million in 2018). 264 Consolidated Annual Report 201940. Other current financial liabilities - €754 million Millions of euro Deferred financial liabilities Other items Total at Dec. 31, 2019 at Dec. 31, 2018 Change 607 147 754 654 134 788 (47) 13 (34) -7.2% 9.7% -4.3% The decrease in other current financial liabilities is attributable The other items mainly refer to amounts due for accrued in- to the €47 million decrease in deferred financial liabilities as a terest. result of a decrease in accrued liabilities on bonds. 41. Net financial position and long-term financial receivables and securities - €45,175 million The following table shows the net financial position and long-term financial receivables and securities on the basis of the items on the consolidated balance sheet. Millions of euro Long-term borrowings Short-term borrowings Other current financial payables (1) Current portion of long-term borrowings Other non-current financial assets included in net financial debt Other current financial assets included in net financial debt Cash and cash equivalents Total Notes at Dec. 31, 2019 at Dec. 31, 2018 Change 43 43 43 26.1 30.1 32 54,174 3,917 47 3,409 (3,185) (4,158) (9,029) 45,175 48,983 3,616 28 3,367 (3,272) (5,003) (6,630) 41,089 5,191 301 19 42 87 845 (2,399) 4,086 10.6% 8.3% 67.9% 1.2% -2.7% -16.9% 36.2% 9.9% (1) Includes current financial payables included under other current financial liabilities. Pursuant to CONSOB instructions of July 28, 2006, the fol- cial debt as provided for in the presentation methods of the lowing table reports the net financial position at December Enel Group. 31, 2019, and December 31, 2018, reconciled with net finan- 265 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsMillions of euro Cash and equivalents on hand Bank and post office deposits Other investments of liquidity Securities Liquidity Short-term financial receivables Short-term portion of long-term financial receivables Current financial receivables Short-term bank debt Commercial paper Short-term portion of long-term bank debt Bonds issued (short-term portion) Other borrowings (short-term portion) Other short-term financial payables (1) Total short-term financial debt Net short-term financial position Debt to banks and financing entities Bonds Other borrowings Long-term financial position at Dec. 31, 2019 at Dec. 31, 2018 Change 87 7,910 1,032 51 9,080 2,522 1,585 4,107 (579) (2,284) (1,121) (1,906) (382) (1,101) (7,373) 5,814 (8,407) (43,294) (2,473) (54,174) 328 5,531 771 63 6,693 3,418 1,522 4,940 (512) (2,393) (1,830) (1,341) (196) (739) (7,011) 4,622 (8,819) (38,633) (1,531) (48,983) (241) 2,379 261 (12) 2,387 (896) 63 (833) (67) 109 709 (565) (186) (362) (362) 1,192 412 (4,661) (942) (5,191) (3,999) (87) (4,086) NET FINANCIAL POSITION as per CONSOB Communication (48,360) (44,361) Long-term financial receivables and securities NET FINANCIAL DEBT 3,185 (45,175) 3,272 (41,089) (1) Includes current financial payables included under other current financial liabilities. 42. Other current liabilities - €13,161 million Millions of euro Payables due to customers Payables due to institutional market operators Payables due to employees Other tax payables Payables due to social security institutions Contingent considerations Payables for put options granted to minority shareholders Current accrued expenses and deferred income Payables for dividends Other Total at Dec. 31, 2019 at Dec. 31, 2018 Change 1,670 4,507 496 1,082 212 116 3 372 2,143 2,560 13,161 1,773 3,945 472 1,093 212 109 - 459 1,913 2,131 12,107 (103) 562 24 (11) - 7 3 (87) 230 429 1,054 Payables due to customers include €880 million (€936 mil- contract, deposits for electricity sales, the use of which is not lion at December 31, 2018) in security deposits related to restricted in any way, are classified as current liabilities given amounts received from customers in Italy as part of electric- that the Company does not have an unconditional right to de- ity and gas supply contracts. Following the finalization of the fer repayment beyond 12 months. 266 -73.5% 43.0% 33.9% -19.0% 35.7% -26.2% 4.1% -16.9% -13.1% 4.6% 38.7% -42.1% -94.9% -49.0% -5.2% 25.8% 4.7% -12.1% -61.5% -10.6% -9.0% -2.7% -9.9% -5.8% 14.2% 5.1% -1.0% - 6.4% - -19.0% 12.0% 20.1% 8.7% Consolidated Annual Report 2019Payables due to institutional market operators include paya- total interim dividend amounted to €1,627 million, compared bles arising from the application of equalization mechanisms with €1,423 million the previous year. to electricity purchases on the Italian market amounting to The increase in other payables mainly reflects the settlement €3,064 million (€2,546 million at December 31, 2018) and on of a dispute between Enel Distribuição São Paulo and Eletro- the Spanish market amounting to €1,267 million (€1,131 mil- bras, which includes €73 million under current items but also lion at December 31, 2018), and on the Latin American mar- includes a non-current portion (readers are invited to consult ket amounting to €176 million (€268 million at December 31, the appropriate note for more on that item). It also reflects 2018). the recognition of the liability connected with the acquisition The change in payables for dividends mainly refers the recog- through financial intermediaries (using share swaps) of addi- nition of the interim dividend of Enel SpA, which under the tional equity stakes in Enel Américas and Enel Chile. The overall rules is settled in January of the following year. In 2019, the amount of that debt at December 31, 2019 was €358 million. 43. Financial instruments This note provides disclosures necessary for users to assess the significance of financial instruments for the Company’s finan- cial position and performance. 43.1 Financial assets by category The following table reports the carrying amount for each ca- down into current and non-current financial assets, showing hedging derivatives and derivatives measured at fair value tegory of financial asset provided for under IFRS 9, broken through profit or loss separately. Millions of euro Non-current Current Notes at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 Financial assets at amortized cost Financial assets at FVOCI Financial assets at fair value through profit or loss Derivative financial assets at FVTPL Other financial assets at FVTPL Financial assets designated upon initial recognition (fair value option) Total financial assets at fair value through profit or loss Derivative financial assets designated as hedging instruments Fair value hedge derivatives Cash flow hedge derivatives Total derivative financial assets designated as hedging instruments TOTAL 43.1.1 43.1.2 43.1.3 43.1.3 43.1.3 43.1.4 43.1.4 4,258 480 29 2,370 - 2,399 32 1,322 1,354 8,491 4,292 413 31 2,080 - 2,111 25 949 974 26,377 61 25,268 72 3,086 3,163 - - - - 3,086 3,163 - 979 979 4 747 751 7,790 30,503 29,254 For more information on fair value measurement, see note 47 “Assets measured at fair value”. 267 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements43.1.1 Financial assets measured at amortized cost The following table reports financial assets measured at amortized cost by nature, broken down into current and non-current financial assets. Millions of euro Cash and cash equivalents Trade receivables Short-term portion of long-term financial receivables Cash collateral Other financial receivables Financial assets from service concession arrangements at amortized cost Other financial assets at amortized cost Notes 29 26.1 26 26, 27 Non-current Current at Dec. 31, 2019 at Dec. 31, 2018 Notes at Dec. 31, 2019 at Dec. 31, 2018 - 917 - - - 835 - - 2,769 2,912 32 29 30.1 30.1 30.1 345 30 340 232 9,029 12,166 1,585 2,153 370 13 6,630 12,752 1,522 2,559 859 12 934 200 30, 31 1,061 Total 4,258 4,292 26,377 25,268 Impairment of financial assets at amortized cost - 12-month ECL, for financial assets for which there has Financial assets measured at amortized cost at December 31, not been a significant increase in credit risk since initial 2019 amounted to €3,370 million (€3,083 million at December recognition; 31, 2018) and are recognized net of allowances for expected - lifetime ECL, for financial assets for which there has credit losses. been a significant increase in credit risk or which are The Group mainly has the following types of financial assets credit impaired (i.e., defaulted based on past due in- measured at amortized cost subject to impairment testing: formation). > cash and cash equivalents; > the simplified approach, for trade receivables, contract > trade receivables and contract assets; assets and lease receivables with or without a significant > financial receivables; and > other financial assets. financing component, based on lifetime ECL without track- ing changes in credit risk. While cash and cash equivalents are also subject to the im- For more information on assets deriving from contracts with pairment requirements of IFRS 9, the identified impairment customers, please see note 25 “Current/Non-current assets/ loss was immaterial. (liabilities) from contracts with customers”. The expected credit loss (ECL), determined using probabili- A forward-looking adjustment can be applied considering ty of default (PD), loss given default (LGD) and exposure at qualitative and quantitative information in order to reflect default (EAD), is the difference between all contractual cash future events and macroeconomic developments that could flows that are due in accordance with the contract and all impact the risk associated with the portfolio or financial in- cash flows that are expected to be received (i.e., all shortfalls) strument. discounted at the original effective interest rate (EIR). Depending on the nature of the financial assets and the credit For calculating ECL, the Group applies two different approaches: risk information available, the assessment of the increase in > the general approach, for financial assets other than trade credit risk can be performed on: receivables, contract assets and lease receivables. This > an individual basis, if the receivables are individually signif- approach, based on an assessment of any significant in- icant and for all receivables which have been individually crease in credit risk since initial recognition, is performed identified for impairment based on reasonable and sup- comparing the PD at origination with PD at the reporting portable information; date, at each reporting date. > a collective basis, if no reasonable and supportable infor- Then, based on the results of the assessment, a loss al- mation is available without undue cost or effort to measure lowance is recognized based on 12-month ECL or lifetime expected credit losses on an individual instrument basis. ECL (i.e., staging): When there is no reasonable expectation of recovering a fi- 268 Consolidated Annual Report 2019nancial asset in its entirety or a portion thereof, the gross car- The following table reports expected credit losses on financial rying amount of the financial asset shall be reduced. assets measured at amortized cost on the basis of the gener- A write-off represents a derecognition event (e.g. the right to al simplified approach. cash flows is legally or contractually extinguished, transferred or expired). Millions of euro Cash and cash equivalents Trade receivables Financial receivables Other financial assets at amortized cost Total at Dec. 31, 2019 at Dec. 31, 2018 Allowance for expected losses - Gross amount 9,029 Total 9,029 Gross amount 6,632 Allowance for expected losses 2 Total 6,630 16,063 2,980 13,083 16,415 2,828 13,587 7,108 1,805 231 159 6,877 1,646 8,081 1,515 229 24 7,852 1,491 34,005 3,370 30,635 32,643 3,083 29,560 To measure expected losses, the Group assesses trade recei- is 180 days past due. Accordingly, beyond this time limit, vables and contract assets with the simplified approach, both trade receivables are presumed to be credit impaired); and on an individual basis (e.g. government entities, authorities, > specific clusters are defined on the basis of specific mar- financial counterparties, wholesale sellers, traders and large kets, business and risk characteristics. companies, etc.) and a collective basis (e.g. retail customers). Contract assets substantially have the same risk characteristi- In the case of individual assessments, PD is generally obtai- In order to measure the ECL for trade credits on a collective ned from external providers. basis, as well as for contract assets, the Group uses the fol- cs as trade receivables for the same types of contracts. lowing assumptions regarding the ECL parameters: Otherwise, in the case of collective assessments, trade re- > PD, assumed equal to the average default rate, is calcula- ceivables are grouped on the basis of their shared credit risk ted by cluster and considering historical data from at least characteristics and information on past due positions, consi- 24 months; dering a specific definition of default. > LGD is a function of the recovery rates for each cluster, Based on each business and local regulatory framework, as discounted using the effective interest rate; and well as differences between customer portfolios, including > EAD is estimated as equal to the carrying amount at the re- their default and recovery rates (comprising expectations for porting date net of cash deposits, including invoices issued recovery beyond 90 days): but not past due and invoices to be issued. > the Group mainly defines a defaulted position as one that 269 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsThe following table reports changes in the allowance for expected credit losses on financial receivables in accordance with the ECL 12-month ECL lifetime general simplified approach. Millions of euro Opening balance at Jan. 1, 2018 Provisions Uses Reversals to profit or loss Other changes Closing balance at Dec. 31, 2018 Opening balance at Jan. 1, 2019 Provisions Uses Reversals to profit or loss Other changes Closing balance at Dec. 31, 2019 7 - - (188) 268 87 87 - - (1) (8) 78 23 4 - (2) 117 142 142 26 - (3) (12) 153 2,609 1,367 (897) (281) 30 2,828 2,828 1,239 (834) (202) (51) 2,980 The following table reports changes in the allowance for expected credit losses on trade receivables. Millions of euro Opening balance at Jan. 1, 2018 Provisions Uses Reversals to profit or loss Other changes Closing balance at Dec. 31, 2018 Opening balance at Jan. 1, 2019 Provisions Uses Reversals to profit or loss Other changes Closing balance at Dec. 31, 2019 The following table reports changes in the allowance for expected credit losses on other financial assets at amortized cost. Millions of euro Opening balance at Jan. 1, 2018 Provisions Uses Reversals to profit or loss Other changes Closing balance at Dec. 31, 2018 Opening balance at Jan. 1, 2019 Provisions Uses Reversals to profit or loss Other changes Closing balance at Dec. 31, 2019 ECL lifetime 15 3 - (3) 9 24 24 105 - (7) 37 159 Note 44 “Risk management” provides additional information on the exposure to credit risk and expected losses. 270 Consolidated Annual Report 201943.1.2 Financial assets at fair value through other comprehensive income The following table shows financial assets at fair value throu- gh other comprehensive income by nature, broken down into current and non-current financial assets. Millions of euro Non-current Current Equity investments in other entities at FVOCI Securities Total Changes in financial assets at FVOCI Equity investments in other entities Millions of euro Opening balance at Jan. 1, 2019 Purchases Sales Changes in fair value through OCI Other changes Closing balance at Dec. 31, 2019 Securities at FVOCI Millions of euro Opening balance at Jan. 1, 2019 Purchases Sales Changes in fair value through OCI Reclassifications Other changes Closing balance at Dec. 31, 2019 Notes 26 26.1 at Dec. 31, 2019 at Dec. 31, 2018 Notes at Dec. 31, 2019 at Dec. 31, 2018 64 416 480 53 360 413 30.1 - 61 61 - 72 72 Non-current Current 53 87 - - (76) 64 - - - - - - Non-current Current 360 160 (53) 10 (61) - 416 72 - - - 61 (72) 61 271 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements43.1.3 Financial assets at fair value through profit or loss The following table shows financial assets at fair value throu- gh profit or loss by nature, broken down into current and non-current financial assets. Millions of euro Non-current Current Derivatives at FVTPL Equity investments in other entities at FVTPL Financial assets from service concession arrangements at FVTPL Total Notes at Dec. 31, 2019 at Dec. 31, 2018 Notes at Dec. 31, 2019 at Dec. 31, 2018 46 26 26 29 8 2,362 2,399 46 30 31 10 2,070 2,111 3,086 3,163 - - - - 3,086 3,163 43.1.4 Derivative financial assets designated as hedging instruments For more information on derivative financial assets, please see note 46 “Derivatives and hedge accounting”. 43.2 Financial liabilities by category The following table shows the carrying amount for each ca- hedging derivatives and derivatives measured at fair value tegory of financial liability provided for under IFRS 9, broken through profit or loss separately. down into current and non-current financial liabilities, showing Millions of euro Notes Non-current Current Financial liabilities measured at amortized cost Financial liabilities at fair value through profit or loss Derivative financial liabilities at FVTPL Total financial liabilities at fair value through profit or loss Derivative financial liabilities designated as hedging instruments Fair value hedge derivatives Cash flow hedge derivatives Total derivative financial liabilities designated as hedging instruments at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 43.2.1 54,931 49,824 28,261 27,567 43.4 43.4 43.4 20 20 1 2,386 2,387 34 34 - 2,575 2,575 2,981 2,981 - 573 573 3,135 3,135 - 1,208 1,208 TOTAL 57,338 52,433 31,815 31,910 For more information on fair value measurement, please see note 48 “Liabilities measured at fair value”. 272 Consolidated Annual Report 201943.2.1 Financial liabilities measured at amortized cost The following table shows financial liabilities at amortized cost by nature, broken down into current and non-current fi- nancial liabilities. Millions of euro Long-term borrowings Short-term borrowings Trade payables Other financial liabilities Total Notes 43.3 39 38 Non-current Current at Dec. 31, 2019 at Dec. 31, 2018 Notes at Dec. 31, 2019 at Dec. 31, 2018 54,174 48,983 - 638 119 - 669 172 54,931 49,824 43.3 43.3 39 42 3,409 3,917 12,322 8,613 28,261 3,367 3,616 12,718 7,866 27,567 273 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements43.3 Borrowings 43.3.1 Long-term borrowings (including the portion falling due within 12 months) - €57,583 million is given by official prices, while for unlisted debt instruments, fair value is determined using valuation techniques appropria- te for each category of financial instrument and the associa- ted market data for the reporting date, including the credit spreads of Enel SpA. The following table reports the carrying amount and fair value for each category of debt, including the portion falling due within 12 months. For listed debt instruments, the fair value The table reports the situation of long-term borrowings and repayment schedules at December 31, 2019, broken down by type of borrowing and interest rate. Millions of euro Nominal value Carrying amount Current portion Portion due in more than 12 months Fair value Nominal value Carrying amount Current portion Portion due in more than 12 months Changes in carrying amount Fair value at Dec. 31, 2019 at Dec. 31, 2018 Bonds: - listed, fixed rate 27,312 26,593 1,621 24,972 31,073 23,811 23,099 - listed, floating rate 3,515 3,488 258 3,230 3,655 3,187 3,166 845 305 22,254 25,944 2,861 3,288 - unlisted, fixed rate 14,458 14,359 - unlisted, floating rate 760 760 - 27 14,359 15,794 12,860 12,758 - 12,758 12,563 733 753 951 951 191 760 932 Total bonds 46,045 45,200 1,906 43,294 51,275 40,809 39,974 1,341 38,633 42,727 Bank borrowings: - fixed rate 896 893 - floating rate 8,610 8,565 70 70 279 842 - 614 947 7,723 8,642 1,495 8,987 1,486 8,954 477 1,009 1,539 1,353 7,601 8,817 70 70 209 209 - 209 210 3,494 322 1,601 (191) 5,226 (593) (389) (139) - use of revolving credit lines Total bank borrowings Leases: - fixed rate - floating rate Total leases Other non-bank borrowings: - fixed rate - floating rate Total other non-bank borrowings Total fixed-rate borrowings Total floating-rate borrowings 9,576 9,528 1,121 8,407 9,659 10,691 10,649 1,830 8,819 10,566 (1,121) 1,856 1,856 108 108 1,964 1,964 792 86 878 822 69 891 257 18 275 92 15 107 1,599 1,856 90 108 1,689 1,964 730 54 784 811 75 886 561 96 657 1,008 101 561 96 657 988 82 1,109 1,070 49 16 65 115 16 131 512 80 592 561 96 657 873 1,024 66 86 939 1,110 1,295 12 1,307 (166) (13) (179) 45,314 44,523 2,249 42,274 50,481 39,735 38,892 1,486 37,406 41,631 5,631 13,149 13,060 1,160 11,900 13,303 13,531 13,458 1,881 11,577 13,429 (398) TOTAL 58,463 57,583 3,409 54,174 63,784 53,266 52,350 3,367 48,983 55,060 5,233 274 Consolidated Annual Report 2019The table below reports long-term financial debt by currency and interest rate. Long-term financial debt by currency and interest rate Millions of euro Euro US dollar Pound sterling Colombian peso Brazilian real Swiss franc Chilean peso/UF Peruvian sol Russian ruble Japanese yen Other currencies Carrying amount Nominal value Carrying amount Nominal value Current average nominal interest rate Current effective interest rate at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 27,272 20,103 4,354 1,381 2,412 419 414 426 225 - 577 27,915 20,239 4,394 1,381 2,458 419 421 426 227 - 583 23,388 18,541 4,750 1,543 2,074 403 700 404 247 - 300 24,025 18,720 4,794 1,543 2,114 403 710 404 247 - 306 2.4% 4.8% 6.1% 7.6% 7.4% 2.1% 6.9% 6.1% 8.5% - 2.9% 5.0% 6.2% 7.6% 7.5% 2.1% 7.0% 6.1% 8.5% - Total non-euro currencies TOTAL 30,311 57,583 30,548 58,463 28,962 52,350 29,241 53,266 Long-term financial debt denominated in currencies other gely attributable to new borrowing in US dollars and Brazilian than the euro increased by €1,349 million. The change is lar- reals. Change in the nominal value of long-term debt Millions of euro Bonds Borrowings - of which leases Total financial debt Nominal value at Dec. 31, 2018 IFRS 16 effects at Jan. 01, 2019 40,809 12,457 657 53,266 - 1,370 1,370 1,370 Repayments New financing Other changes Exchange differences Nominal value at Dec. 31, 2019 (1,652) (3,859) (211) 6,349 2,550 224 (5,511) 8,899 - (88) (88) (88) 539 (12) 12 527 46,045 12,418 1,964 58,463 Compared with December 31, 2019, the nominal value of long- Enel SpA, maturing in June 2019; term debt at December 31, 2019 increased by €5,197 million, > a fixed-rate bond (€125 million) issued by Enel Finance In- the net effect of €8,899 million in new borrowings, the increase ternational, maturing in November 2019; in financial debt under leases of €1,370 million due to the appli- > two bonds (equivalent to €331 million) issued by Enel Dis- cation of the new IFRS 16, and the impact of adverse exchange tribuição São Paulo repaid in advance as part of a liability rate developments in the amount of €527 million, only partly management operations carried out by the company in offset by repayments of €5,511 million and other changes in June 2019. debt of €(88) million. Repayments in 2019 concerned bonds in the amount of €1,652 following: million and borrowings totaling €3,859 million. > €500 million in respect of loans of Enel SpA repaid in ad- The main repayments of borrowings in the year included the More specifically, the main bonds maturing in 2019 included: > €200 million in respect of bank borrowings of Endesa, of > a fixed-rate bond (equivalent to €617 million) issued by which €46 million in subsidized loans; vance; 275 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements > the equivalent of €459 million in respect of bank borrow- panies in South America, of which €248 million in sustain- ings of Enel Russia, of which €73 million in sustainable able financing. loans; The main new borrowing carried out in 2019 involved bonds in > €285 million in respect of sustainable loans of the Italian the amount of €6,349 million and borrowings of €2,550 million. companies; The table below shows the main characteristics of financial > the equivalent of €1,782 million in respect of loans of com- transactions carried out in 2019. Issuer/Borrower Issue/Grant date Amount in millions of euro Currency Interest rate Interest rate type Maturity Bonds Enel Finance International Enel Finance International Enel Finance International Enel Finance International Enel Finance International Codensa Codensa Enel Distribuição Ceará Enel Distribuição Ceará Enel Distribuição Rio Enel Distribuição São Paulo Enel Distribuição São Paulo Enel Green Power Volta Grande Enel Green Power Volta Grande Enel Distribuição Goiás Enel Distribuição Rio 21.01.2019 1,000 EUR 1.50% Fixed rate 21.07.2025 10.09.2019 1,336 USD 2.65% Fixed rate 10.09.2024 17.10.2019 1,000 EUR 0.00% Fixed rate 17.06.2024 17.10.2019 1,000 EUR 0.375% Fixed rate 17.06.2027 17.10.2019 500 EUR 1.125% Fixed rate 17.10.2034 07.03.2019 07.03.2019 07.03.2019 07.03.2019 54 76 77 66 COP COP BRL BRL CPI + 3.56% Floating rate 07.03.2029 6.30% Fixed rate 07.03.2023 CDI + 0.50% p.a. Floating rate 15.03.2023 IPCA + 4.50% p.a. Floating rate 15.03.2024 12.04.2019 221 BRL 108% CDI Floating rate 15.03.2024 28.06.2019 155 BRL CDI + 0.80% p.a. Floating rate 15.05.2025 28.06.2019 177 BRL 05.11.2019 116 BRL 05.11.2019 63 BRL 5,840 IPCA + 4.01% p.a. IPCA + 3.70% p.a. IPCA + 3.70% p.a. Floating rate 15.05.2026 Floating rate 15.10.2029 Floating rate 15.10.2029 24.01.2019 129 USD Libor 3M + 0.10% Floating rate 29.01.2021 04.02.2019 89 BRL 8.40% Fixed rate 07.02.2022 Endesa 19.03.2019 335 EUR Endesa 20.05.2019 300 EUR e-distribuzione 20.06.2019 250 EUR Euribor 6M + 0.45% Euribor 6M + 0.54% Euribor 6M + 0.41% Floating rate 19.03.2034 Floating rate 10.05.2031 Floating rate 20.06.2034 Enel Russia 24.07.2019 71 RUB 7.67% Fixed rate 24.07.2020 Total bonds Bank borrowings: Total bank borrowings 1,174 The Group’s main long-term financial liabilities are governed um-Term Notes program, issues of subordinated unconverti- by covenants that are commonly adopted in international busi- ble hybrid bonds (so-called “hybrid bonds”) and loans granted ness practice. These liabilities primarily regard the bond issues by banks and other financial institutions (including the Europe- carried out within the framework of the Global/Euro Medi- an Investment Bank and Cassa Depositi e Prestiti SpA). 276 Consolidated Annual Report 2019The main covenants regarding bond issues carried out within > negative pledge clauses, under which the borrower and, in the framework of the Global/Euro Medium-Term Notes pro- some cases, the guarantor are subject to limitations on the gram of (i) Enel and Enel Finance International NV (including establishment of mortgages, liens or other encumbrances the green bonds of Enel Finance International NV guaranteed on all or part of their respective assets, with the exception by Enel SpA, which are used to finance the Group’s so-called of expressly permitted encumbrances; eligible green projects) and those regarding bonds issued by > disposals clauses, under which the borrower and, in some Enel Finance International NV on the US market guaranteed cases, the guarantor may not dispose of their assets or by Enel SpA can be summarized as follows: operations, with the exception of expressly permitted dis- > negative pledge clauses under which the issuer and the posals; guarantor may not establish or maintain mortgages, liens > pari passu clauses, under which the payment undertak- or other encumbrances on all or part of its assets or reve- ings of the borrower have the same seniority as its other nue to secure certain financial liabilities, unless the same unsecured and unsubordinated payment obligations; encumbrances are extended equally or pro rata to the > change of control clauses, under which the borrower and, bonds in question; in some cases, the guarantor could be required to rene- > pari passu clauses, under which the bonds and the asso- gotiate the terms and conditions of the financing or make ciated security constitute a direct, unconditional and un- compulsory early repayment of the loans granted; secured obligation of the issuer and the guarantor and are > rating clauses, which provide for the borrower or the guar- issued without preferential rights among them and have antor to maintain their rating above a certain specified lev- at least the same seniority as other present and future un- el; subordinated and unsecured bonds of the issuer and the > cross-default clauses, under which the occurrence of a de- guarantor; fault event in respect of a specified financial liability (above > cross-default clauses, under which the occurrence of a de- a threshold level) of the issuer or, in some cases, the guar- fault event in respect of a specified financial liability (above antor constitutes a default in respect of the liabilities in a threshold level) of the issuer, the guarantor or, in some question, which become immediately repayable. cases, “significant” subsidiaries constitutes a default in In some cases the covenants are also binding for the signif- respect of the liabilities in question, which become imme- icant companies or subsidiaries of the obligated parties. All diately repayable. the financial borrowings considered specify “events of de- During 2019, Enel Finance International NV issued two “sus- fault” typical of international business practice, such as, for tainable” bonds on the European market (as part of the Euro example, insolvency, bankruptcy proceedings or the entity Medium Term Notes - EMTN bond issue program) and on the ceases trading. American market, both guaranteed by Enel SpA, linked to the In addition, the guarantees issued by Enel in the interest of achievement of a number of the Sustainable Development e-distribuzione SpA for certain loans to e-distribuzione SpA Goals (SDGs) of the United Nations that contain the same from Cassa Depositi e Prestiti SpA require that at the end of covenants as other bonds of the same type. each six-month measurement period that Enel’s net consol- idated financial debt shall not exceed 4.5 times annual con- The main covenants covering Enel’s hybrid bonds can be solidated EBITDA. summarized as follows: Finally, the debt of Enel Américas SA, Enel Chile SA and the > subordination clauses, under which each hybrid bond is other Latin American subsidiaries (notably Enel Generación subordinate to all other bonds issued by the company and Chile SA) contain covenants and events of default typical of has the same seniority with all other hybrid financial in- international business practice, which had all been complied struments issued, being senior only to equity instruments; with as at December 31, 2019. > prohibition on mergers with other companies, the sale or leasing of all or a substantial part of the company’s assets to another company, unless the latter succeeds in all obli- gations of the issuer. The main covenants envisaged in the loan contracts of Enel and Enel Finance International NV and the other Group com- panies can be summarized as follows: 277 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsThe following table reports the impact on gross long-term debt of hedges to mitigate exchange risk. Long-term financial debt by currency after hedging Millions of euro at Dec. 31, 2019 at Dec. 31, 2018 Initial debt structure Impact of hedge Debt structure after hedging Initial debt structure Impact of hedge Debt structure after hedging Carrying amount Nominal amount 23,388 18,541 4,750 1,543 2,074 403 700 404 247 300 28,962 52,350 24,025 18,720 4,794 1,543 2,114 403 710 404 247 306 29,241 53,266 % 45.0% 35.1% 9.0% 2.9% 4.0% 0.8% 1.3% 0.8% 0.5% 0.6% 55.0% 100.0% 18,901 (15,064) (4,794) 1,207 (403) - - - - 73 80 (18,901) 42,926 3,656 1,543 3,321 - - 710 404 320 386 10,340 53,266 80.6% 6.9% - - 2.9% 6.2% 1.3% 0.8% 0.6% 0.7% 19.4% 100.0% Euro US dollar Pound sterling Colombian peso Brazilian real Swiss franc Chilean peso/UF Peruvian sol Russian ruble Other currencies Total non-euro currencies TOTAL Carrying amount Nominal amount 27,272 20,103 4,354 1,381 2,412 419 414 426 225 577 30,311 57,583 27,915 20,239 4,394 1,381 2,458 419 421 426 227 583 30,548 58,463 % 47.8% 34.6% 7.5% 2.4% 4.2% 0.7% 0.7% 0.7% 0.4% 1.0% 52.2% 100.0% 20,218 (16,445) (4,394) - 968 (419) - - - 72 (20,218) - 48,133 3,794 - 1,381 3,426 - 421 426 227 655 10,330 58,463 82.3% 6.5% - 2.4% 5.9% - 0.7% 0.7% 0.4% 1.1% 17.7% 100.0% The amount of floating-rate debt that is not hedged against income statement (raising borrowing costs) in the event of an interest rate risk is the main risk factor that could impact the increase in market interest rates. Millions of euro 2019 2018 Floating rate Fixed rate Total Pre-hedge % Post-hedge % Pre-hedge % Post-hedge 17,113 45,314 62,427 27.4% 72.6% 12,208 50,219 62,427 19.6% 80.4% 17,175 39,735 56,910 30.2% 69.8% 12,983 43,927 56,910 % 22.8% 77.2% At December 31, 2019, 27.4% of financial debt was floating gement purposes but ineligible for hedge accounting, 80% rate (30.2% at December 31, 2018). Taking account of hedges of net financial debt was hedged (77% hedged at December of interest rates considered effective pursuant to the IFRS- 31, 2018). EU, 19.6% of net financial debt at December 31, 2019 (22.8% at December 31, 2018) was exposed to interest rate risk. In- These results are in line with the limits established in the risk cluding interest rate derivatives treated as hedges for mana- management policy. 278 Consolidated Annual Report 2019The following table reports the impact on gross long-term debt of hedges to mitigate exchange risk. Long-term financial debt by currency after hedging Euro US dollar Pound sterling Colombian peso Brazilian real Swiss franc Chilean peso/UF Peruvian sol Russian ruble Other currencies Total non-euro currencies TOTAL 27,272 20,103 4,354 1,381 2,412 419 414 426 225 577 30,311 57,583 27,915 20,239 4,394 1,381 2,458 419 421 426 227 583 30,548 58,463 % 47.8% 34.6% 7.5% 2.4% 4.2% 0.7% 0.7% 0.7% 0.4% 1.0% 52.2% 100.0% 20,218 (16,445) (4,394) 968 (419) 72 (20,218) - - - - - 48,133 3,794 1,381 3,426 - - 421 426 227 655 10,330 58,463 82.3% 6.5% 2.4% 5.9% - - 0.7% 0.7% 0.4% 1.1% 17.7% 100.0% Millions of euro at Dec. 31, 2019 at Dec. 31, 2018 Initial debt structure Impact of hedge Debt structure after hedging Initial debt structure Impact of hedge Debt structure after hedging Carrying amount Nominal amount Carrying amount Nominal amount 23,388 18,541 4,750 1,543 2,074 403 700 404 247 300 28,962 52,350 24,025 18,720 4,794 1,543 2,114 403 710 404 247 306 29,241 53,266 % 45.0% 35.1% 9.0% 2.9% 4.0% 0.8% 1.3% 0.8% 0.5% 0.6% 55.0% 100.0% 18,901 (15,064) (4,794) - 1,207 (403) - - 73 80 (18,901) - 42,926 3,656 - 1,543 3,321 - 710 404 320 386 10,340 53,266 80.6% 6.9% - 2.9% 6.2% - 1.3% 0.8% 0.6% 0.7% 19.4% 100.0% 279 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements43.3.2 Short-term borrowings - €3,917 million €3,917 million, an increase of €301 million on December 31, 2018. They break down as follows. At December 31, 2019 short-term borrowings amounted to Millions of euro Short-term bank borrowings Commercial paper Cash collateral and other financing on derivatives Other short-term borrowings (1) Short-term borrowings at Dec. 31, 2019 at Dec. 31, 2018 Change 579 2,284 750 304 3,917 512 2,393 301 410 3,616 67 (109) 449 (106) 301 (1) Does not include current financial debt included in other current financial liabilities. Short-term bank borrowings amounted to €579 million. Commercial paper amounted to €2,284 million, issued by 43.4 Derivative financial liabilities For more information on derivative financial liabilities, please Enel Finance International, Enel Finance America, Endesa and see note 46 “Derivatives and hedge accounting”. a number of South American companies. The main commercial paper programs include: > €6,000 million of Enel Finance International guaranteed by Enel SpA; > €3,000 million of Endesa; > $3,000 million (equivalent to €2,671 million at December 31, 2019) of Enel Finance America. Millions of euro Financial assets at amortized cost Financial assets at FVOCI Equity investments at FVOCI Other financial assets at FVOCI Total financial assets at FVOCI Financial assets at FVTPL Financial assets at FVTPL Financial assets designated upon initial recognition (fair value option) Total financial assets at FVTPL Financial liabilities measured at amortized cost (3,514) Financial liabilities at FVTPL Financial liabilities held for trading Financial liabilities designated upon initial recognition (fair value option) Total financial liabilities at FVTPL - - - 43.5 Net gains and losses The following table shows net gains and losses by category of financial instruments, excluding derivatives. 2019 2018 Net gains/ (losses) Of which impairment/ reversal of impairment Net gains/ (losses) Of which impairment/ reversal of impairment (525) (1,137) (409) (1,101) 1 5 6 177 - 177 - - - (23) - (23) - - - - 10 4 14 385 - 385 (3,545) - - - - - - 188 - 188 - - - - For more details on net gains and losses on derivatives, please see note 11 “Net financial income/(expense) from derivatives”. 280 Consolidated Annual Report 201944. Risk management Financial risk management governance and objectives As part of its operations, the Enel Group is exposed to a va- goal of stabilizing borrowing costs and containing the cost of funds. This goal is pursued through the diversification of the portfo- riety of financial risks, notably interest rate risk, exchange risk lio of financial liabilities by contract type, maturity and inte- and commodity risk, credit risk and liquidity risk. rest rate, and modifying the risk profile of specific exposures As noted in the section “Risk management” in the Report using OTC derivatives, mainly interest rate swaps and interest on Operations, the Group’s governance arrangements for fi- rate options. The term of such derivatives does not exceed nancial risks include internal committees and the establish- the maturity of the underlying financial liability, so that any ment of specific policies and operational limits. Enel’s primary change in the fair value and/or expected cash flows of such objective is to mitigate financial risks appropriately so that contracts is offset by a corresponding change in the fair value they do not give rise to unexpected changes in results. and/or cash flows of the hedged position. The Group’s policies for managing financial risks provide for Proxy hedging techniques can be used in a number of resi- the mitigation of the effects on performance of changes in dual circumstances, when the hedging instruments for the interest rates and exchange rates with the exclusion of tran- risk factors are not available on the market or are not suffi- slation risk (connected with consolidation of the accounts). ciently liquid. This objective is achieved at the source of the risk, through For the purpose of EMIR compliance, in order to test the the diversification of both the nature of the financial instru- actual effectiveness of the hedging techniques adopted, the ments and the sources of revenue, and by modifying the risk Group subjects its hedge portfolios to periodic statistical as- profile of specific exposures with derivatives entered into on sessment. over-the-counter markets or with specific commercial agree- Using interest rate swaps, the Enel Group agrees with the ments. counterparty to periodically exchange floating-rate interest As part of its governance of financial risks, Enel regularly mo- flows with fixed-rate flows, both calculated on the same no- nitors the size of the OTC derivatives portfolio in relation to tional principal amount. the threshold values set by regulators for the activation of Floating-to-fixed interest rate swaps transform floating-rate fi- clearing obligations (EMIR - European Market Infrastructure nancial liabilities into fixed rate liabilities, thereby neutralizing Regulation no. 648/2012 of the European Parliament and of the exposure of cash flows to changes in interest rates. the Council). During 2019, no overshoot of those threshold Fixed-to-floating interest rate swaps transform fixed rate fi- values was detected. nancial liabilities into floating-rate liabilities, thereby neutrali- There were no changes in the sources of exposure to such zing the exposure of their fair value to changes in interest risks compared with the previous year. rates. Interest rate risk Interest rate risk derives primarily from the use of financial criteria for floating-rate financial liabilities. Some structured borrowings have multi-stage cash flows he- instruments and manifests itself as unexpected changes in dged by interest rate swaps that at the reporting date, and for charges on financial liabilities, if indexed to floating rates and/ a limited time, provide for the exchange of fixed-rate interest Floating-to-floating interest rate swaps transform the indexing or exposed to the uncertainty of financial terms and conditions flows. in negotiating new debt instruments, or as an unexpected Interest rate options involve the exchange of interest diffe- change in the value of financial instruments measured at fair rences calculated on a notional principal amount once certain value (such as fixed-rate debt). thresholds (strike prices) are reached. These thresholds speci- The main financial liabilities held by the Group include bonds, fy the effective maximum rate (cap) or the minimum rate (flo- bank borrowings, payables to other lenders, commercial pa- or) to which the synthetic financial instrument will be indexed per, derivatives, cash deposits received to secure commercial as a result of the hedge. Certain hedging strategies provide or derivative contracts (guarantees, cash collateral). for the use of combinations of options (collars) that establish The Enel Group mainly manages interest rate risk through the minimum and maximum rates at the same time. In this the definition of an optimal financial structure, with the dual case, the strike prices are normally set so that no premium is 281 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementspaid on the contract (zero cost collars). uncertainty about future interest rate developments because Such contracts are normally used when the fixed interest rate they make it possible to benefit from any decrease in interest that can be obtained in an interest rate swap is considered rates. too high with respect to market expectations for future in- The following table reports the notional amount of interest terest rate developments. In addition, interest rate options rate derivatives at December 31, 2019 and December 31, are also considered most appropriate in periods of greater 2019 broken down by type of contract. Millions of euro Notional amount Floating-to-fixed interest rate swaps Fixed-to-floating interest rate swaps Fixed-to-fixed interest rate swaps Floating-to-floating interest rate swaps Interest rate options Total 2019 7,932 152 - 327 50 8,461 2018 10,032 154 - 165 50 10,401 For more details on interest rate derivatives, please see note financial expense associated with unhedged gross debt. 46 “Derivatives and hedge accounting”. These market scenarios are obtained by simulating parallel in- creases and decreases in the yield curve as at the reporting date. Interest rate risk sensitivity analysis There were no changes introduced in the methods and as- Enel analyzes the sensitivity of its exposure by estimating the sumptions used in the sensitivity analysis compared with the effects of a change in interest rates on the portfolio of finan- previous year. cial instruments. With all other variables held constant, the Group’s profit be- More specifically, sensitivity analysis measures the potential fore tax would be affected by a change in the level of interest impact on profit or loss and on equity of market scenarios that rates as follows. would cause a change in the fair value of derivatives or in the Millions of euro 2019 Change in financial expense on gross long-term floating-rate debt after hedging Change in fair value of derivatives classified as non-hedging instruments Change in fair value of derivatives designated as hedging instruments Cash flow hedges Fair value hedges Pre-tax impact on profit or loss Pre-tax impact on equity Increase Decrease Increase Decrease 21 6 - - (21) (6) - - - - 166 - - - (166) - Basis points 25 25 25 25 At December 31, 2019, 22.5% (25.4% at December 31, 2018) denominated in a currency other than the currency of account. of gross long-term financial debt was floating rate. Taking ac- The Group’s consolidated financial statements are also exposed count of effective cash flow hedges of interest rate risk (in ac- to translation risk as a result of the conversion of the financial cordance with the provisions of the IFRS-EU), 85.9% of gross statements of foreign subsidiaries, which are denominated in long-term financial debt was hedged at December 31, 2019 local currencies, into euros as the Group’s currency of account. (82.5% at December 31, 2018). The Group’s exposure to exchange risk is connected with the Exchange risk Exchange risk mainly manifests itself as unexpected changes purchase or sale of fuels and power, investments (cash flows for capitalized costs), dividends and the purchase or sale of equity investments, commercial transactions and financial as- in the financial statement items associated with transactions sets and liabilities. 282 Consolidated Annual Report 2019The Group policies for managing exchange risk provide for the Currency forwards are contracts in which the counterparties mitigation of the effects on profit or loss of changes in the agree to exchange principal amounts denominated in different level of exchange rates, with the exception of the translation currencies at a specified future date and exchange rate (the effects connected with consolidation. strike). Such contracts may call for the actual exchange of the In order to minimize the exposure to exchange risk, Enel imple- two principal amounts (deliverable forwards) or payment of ments diversified revenue and cost sources geographically, and the difference generated by differences between the strike uses indexing mechanisms in commercial contracts. Enel also exchange rate and the prevailing exchange rate at maturity uses various types of derivative, typically on the OTC market. (non-deliverable forwards). In the latter case, the strike rate The derivatives in the Group’s portfolio of financial instru- and/or the spot rate can be determined as averages of the ments include cross currency interest rate swaps, currency rates observed in a given period. forwards and currency swaps. The term of such contracts Currency swaps are contracts in which the counterparties en- does not exceed the maturity of the underlying instrument, ter into two transactions of the opposite sign at different future so that any change in the fair value and/or expected cash dates (normally one spot, the other forward) that provide for flows of such instruments offsets the corresponding change the exchange of principal denominated in different currencies. in the fair value and/or cash flows of the hedged position. Cross currency interest rate swaps are used to transform a The following table reports the notional amount of transac- long-term financial liability denominated in currency other tions outstanding at December 31, 2019 and December 31, than the currency of account into an equivalent liability in the 2018, broken down by type of hedged item. currency of account. Millions of euro Cross currency interest rate swaps (CCIRSs) hedging debt denominated in currencies other than the euro Currency forwards hedging exchange risk on commodities Currency forwards hedging future cash flows in currencies other than the euro Other currency forwards Total Notional amount 2019 22,756 4,291 4,760 1,488 33,294 2018 24,712 4,924 5,386 1,584 36,606 More specifically, these include: Taking account of hedges of exchange risk, the percentage > CCIRSs with a notional amount of €22,756 million to hedge of debt not hedged against that risk amounted to 18% at De- the exchange risk on debt denominated in currencies other cember 31, 2019 (19% at December 31, 2018). than the euro (€24,712 million at December 31, 2018); > currency forwards with a total notional amount of €9,051 Exchange risk sensitivity analysis million used to hedge the exchange risk associated with The Group analyses the sensitivity of its exposure by estimating purchases and sales of natural gas, purchases of fuel and the effects of a change in exchange rates on the portfolio of fi- expected cash flows in currencies other than the euro nancial instruments. (€10,310 million at December 31, 2018); More specifically, sensitivity analysis measures the potential im- > other currency forwards include OTC derivatives transactions pact on profit or loss and equity of market scenarios that would carried out to mitigate exchange risk on expected cash flows cause a change in the fair value of derivatives or in the financial ex- in currencies other than the currency of account connected pense associated with unhedged gross medium/long-term debt. with the purchase of investment goods in the renewables These scenarios are obtained by simulating the appreciation/ and infrastructure and networks sectors (new generation dig- depreciation of the euro against all of the currencies compared ital meters), on operating expenses for the supply of cloud with the value observed as at the reporting date. services and on revenue from the sale of renewable energy. There were no changes in the methods or assumptions used in At December 31, 2019, 52% (55% at December 31, 2018) of the sensitivity analysis compared with the previous year. Group long-term debt was denominated in currencies other With all other variables held constant, the profit before tax would than the euro. be affected by changes in exchange rates as follows. 283 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsMillions of euro 2019 Change in fair value of derivatives classified as non-hedging instruments Change in fair value of derivatives designated as hedging instruments Pre-tax impact on profit or loss Pre-tax impact on equity Increase Decrease Increase Decrease Exchange rate 10% 525 (640) - - Cash flow hedges Fair value hedges 10% 10% - 7 - (9) (2,929) - 3,580 - Commodity risk The risk of fluctuations in the price of energy commodities respect of the sale of energy on the spot market not hedged with such contracts is aggregated by uniform risk factors that is generated by the volatility of prices and structural correla- can be managed with hedging transactions on the market. tions between them, which create uncertainty in the margin Proxy hedging techniques can be used for the industrial port- on purchases and sales of electricity and fuels at variable pric- folios when the hedging instruments for the specific risk fac- es (e.g. indexed bilateral contracts, transactions on the spot tors generating the exposure are not available on the market market, etc.). or are not sufficiently liquid. In addition, Enel uses portfolio The exposures on indexed contracts are quantified by break- hedging techniques to assess opportunities for netting inter- ing down the contracts that generate exposure into the un- company exposures. derlying risk factors. The Group mainly uses plain vanilla derivatives for hedging To contain the effects of fluctuations and stabilize margins, in (more specifically, forwards, swaps, options on commodities, accordance with the policies and operating limits determined futures, contracts for differences). by the Group’s governance, Enel develops and plans strate- Enel also engages in proprietary trading in order to maintain gies that impact the various phases of the industrial process a presence in the Group’s reference energy commodity mar- linked to the production and sale of electricity and gas (such as forward procurement and long-term commercial agree- ments), as well as risk mitigation plans and techniques using derivative contracts (hedging). kets. These operations consist in taking on exposures in ener- gy commodities (oil products, gas, coal, CO2 certificates and electricity) using financial derivatives and physical contracts traded on regulated and over-the-counter markets, optimizing As regards electricity sold by the Group, Enel mainly uses profits through transactions carried out on the basis of ex- fixed-price contracts in the form of bilateral physical contracts pected market developments. (PPAs) and financial contracts (e.g. contracts for differences, The following table reports the notional amount of outstand- VPP contracts, etc.) in which differences are paid to the coun- ing transactions at December 31, 2019 and December 31, terparty if the market electricity price exceeds the strike price 2018, broken down by type of instrument. and to Enel in the opposite case. The residual exposure in Millions of euro Forward and futures contracts Swaps Options Embedded Total For more details, please see note 46 “Derivatives and hedge accounting”. Notional amount 2019 35,824 5,706 654 68 42,252 2018 41,157 6,346 549 - 48,052 284 Consolidated Annual Report 2019Sensitivity analysis of commodity risk fuel scenario and the basket of formulas used in the contracts The following table presents the results of the analysis of sensitivity to a reasonably possible change in the commodity prices underlying the valuation model used in the scenario at the same date, with all other variables held constant. The impact on pre-tax profit of shifts of +15% and -15% in the price curve for the main commodities that make up the is mainly attributable to the change in the price of electricity, gas and petroleum products and, to a lesser extent, of CO2. The impact on equity of the same shifts in the price curve is primarily due to changes in the price of electricity, petroleum products and, to a lesser extent, CO2. The Group’s exposure to changes in the prices of other commodities is not material. Millions of euro 2019 Change in the fair value of trading derivatives on commodities Change in the fair value of derivatives on commodities designated as hedging instruments Commodi- ty price 15% 15% Pre-tax impact on profit or loss Pre-tax impact on equity Increase Decrease Increase Decrease (18) - 79 - - 32 - (29) Credit risk The Group’s commercial, commodity and financial operations of uniform criteria – in all the main Regions/Countries/Global Business Lines and at the consolidated level – in measuring expose it to credit risk, i.e. the possibility that a deterioration commercial credit exposures in order to promptly identify any in the creditworthiness of a counterparty that has an adverse deterioration in the quality of outstanding receivables and any impact on the expected value of the creditor position or, for mitigation actions to be taken. trade payables only, increase average collection times. The policy for managing credit risk associated with commer- Accordingly, the exposure to credit risk is attributable to the cial activities provides for a preliminary assessment of the following types of operations: creditworthiness of counterparties and the adoption of miti- > the sale and distribution of electricity and gas in free and gation instruments, such as obtaining collateral or unsecured regulated markets and the supply of goods and services guarantees. (trade receivables); In addition, the Group undertakes transactions to assign re- > trading activities that involve the physical exchange of as- ceivables without recourse, which results in the complete sets or transactions in financial instruments (the commod- derecognition of the corresponding assets involved in the ity portfolio); assignment, as the risks and rewards associated with them > trading in derivatives, bank deposits and, more generally, have been transferred. financial instruments (the financial portfolio). Finally, with regard to financial and commodity transactions, In order to minimize credit risk, credit exposures are managed risk mitigation is pursued with a uniform system for assessing at the Region/Country/Global Business Line level by different counterparties at the Group level, including implementation units, thereby ensuring the necessary segregation of risk at the level of Regions/Countries/Global Business Lines, as management and control activities. Monitoring the consoli- well as with the adoption of specific standardized contractual dated exposure is carried out by Enel SpA. frameworks that contain risk mitigation clauses (e.g. netting In addition, at the Group level the policy provides for the use arrangements) and possibly the exchange of cash collateral. 285 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsFinancial receivables Millions of euro Staging Performing Underperforming Non-performing Total at Dec. 31, 2019 Basis for recognition of expected loss allowance Avg loss rate (PD*LGD) 12 m ECL 1.2% Lifetime ECL 41.8% Lifetime ECL 34.9% Gross carrying amount 6,691 110 307 7,108 Expected loss allowance Net value 78 46 107 231 6,613 64 200 6,877 Contract assets, trade receivables and other receivables: individual measurement at Dec. 31, 2019 Avg loss rate (PD*LGD) Gross carrying amount Expected loss allowance Net value 0.2% 640 1.2% 4,872 1.5% 1.4% 3.1% 11.5% 7.4% 22.1% 65.2% 20.6% 100.0% - - - - - - 410 218 130 52 54 398 1,177 7,311 228 97 - - - - 3 4 1 58 6 3 4 6 4 88 767 936 47 97 - - - - 3 4 639 4,814 404 215 126 46 50 310 410 6,375 181 - - - - - - - 332 8,283 151 1,088 181 7,195 Millions of euro Contract assets Trade receivables Trade receivables not past due Trade receivables past due: - 1-30 days - 31-60 days - 61-90 days - 91-120 days - 121-150 days - 151-180 days - more than 180 days (credit impaired) Total trade receivables Other receivables Other receivables not past due Other receivables past due: - 1-30 days - 31-60 days - 61-90 days - 91-120 days - 121-150 days - 151-180 days - more than 180 days (credit impaired) Total other receivables TOTAL 286 Consolidated Annual Report 2019Contract assets, trade receivables and other receivables: collective measurement Millions of euro Contract assets Trade receivables Trade receivables not past due Trade receivables past due: - 1-30 days - 31-60 days - 61-90 days - 91-120 days - 121-150 days - 151-180 days - more than 180 days (credit impaired) Total trade receivables Other receivables Other receivables not past due Other receivables past due: - 1-30 days - 31-60 days - 61-90 days - 91-120 days - 121-150 days - 151-180 days - more than 180 days (credit impaired) Total other receivables TOTAL Avg loss rate (PD*LGD) Gross carrying amount Expected loss allowance at Dec. 31, 2019 6.7% 0.8% 2.2% 11.7% 18.7% 24.5% 28.8% 37.9% 61.1% 1.5% - - - - - - - 15 3,455 1,660 197 139 98 80 103 3,020 8,752 521 911 3 21 2 5 8 2 1,473 10,240 1 29 36 23 26 24 23 39 1,844 2,044 8 - - - - - - - 8 2,053 Net value 14 3,426 1,624 174 113 74 57 64 1,176 6,708 513 911 3 21 2 5 8 2 1,465 8,187 Liquidity risk Liquidity risk manifests itself as uncertainty about the Group’s ding liquidity on hand and short-term deposits, available com- mitted credit lines and a portfolio of highly liquid assets. ability to discharge its obligations associated with financial lia- In the long term, liquidity risk is mitigated by maintaining a bilities that are settled by delivering cash or another financial balanced maturity profile for our debt, access to a range of asset. sources of funding on different markets, in different curren- Enel manages liquidity risk by implementing measures to cies and with diverse counterparties. ensure an appropriate level of liquid financial resources, mi- The mitigation of liquidity risk enables the Group to maintain nimizing the associated opportunity cost and maintaining a a credit rating that ensures access to the capital market and balanced debt structure in terms of its maturity profile and limits the cost of funds, with a positive impact on its perfor- funding sources. mance and financial position. In the short term, liquidity risk is mitigated by maintaining an appropriate level of unconditionally available resources, inclu- The Group holds the following undrawn lines of credit: 287 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsMillions of euro at Dec. 31, 2019 at Dec. 31, 2018 Committed credit lines Uncommitted credit lines Commercial paper Total Maturity analysis Expiring within one year Expiring beyond one year Expiring within one year Expiring beyond one year 215 927 9,627 10,769 15,461 - - 15,461 750 355 6,990 8,095 13,758 - - 13,758 The table below summarizes the maturity profile of the Group’s long-term debt. Millions of euro Maturing in Less than 3 months From 3 months to 1 year 2021 2022 2023 2024 Beyond 992 - - - 629 258 - 27 1,385 2,283 329 - 111 518 1,825 97 2,911 703 2,217 97 4,919 13,474 486 1,328 97 1,194 8,989 331 992 914 1,825 4,723 5,928 6,830 23,988 3 82 - 85 67 6 73 27 3 30 276 760 - 149 1,285 - 1,036 1,434 190 12 202 65 12 77 229 18 247 71 23 94 197 637 68 902 430 15 445 117 15 132 33 702 - 735 126 14 140 137 8 145 35 722 - 757 99 14 113 30 - 30 200 4,377 2 4,579 715 29 744 375 8 383 1,180 2,229 3,600 6,202 6,948 7,730 29,694 Bonds: - listed, fixed rate - listed, floating rate - unlisted, fixed rate - unlisted, floating rate Total bonds Bank borrowings: - fixed rate - floating rate - use of revolving credit lines Total bank borrowings Leases: - fixed rate - floating rate Total leases Other non-bank borrowings: - fixed rate - floating rate Total other non-bank borrowings TOTAL 288 Consolidated Annual Report 2019Commitments to purchase commodities In conducting its business, the Enel Group has entered into contracts to purchase specified quantities of commodities at a certain future date for its own use, which qualify for the own use exemption provided for under IFRS 9. The following table reports the undiscounted cash flows asso- ciated with outstanding commitments at December 31, 2019. Millions of euro Commitments to purchase commodities: at Dec. 31, 2019 2016-2020 2021-2025 2026-2030 Beyond - electricity - fuels Total 97,472 48,016 145,488 26,667 26,986 53,653 22,603 13,010 35,613 17,041 6,119 23,160 31,161 1,901 33,062 45. Offsetting financial assets and financial liabilities At December 31, 2019, the Group did not hold offset positions in assets and liabilities, as it is not the Enel Group’s policy to settle financial assets and liabilities on a net basis. 289 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements46. Derivatives and hedge accounting The following tables show the notional amount and the fair The notional amount of a derivative contract is the amount on value of derivative financial assets and derivative financial lia- the basis of which cash flows are exchanged. This amount can bilities eligible for hedge accounting or measured a FVTPL, be expressed as a value or a quantity (for example tons, con- classified on the basis of the type of hedge relationship and verted into euros by multiplying the notional amount by the the hedged risk, broken down into current and non-current agreed price). Amounts denominated in currencies other than instruments. the euro are converted at the official end-year exchange rates provided by the World Markets Reuters (WMR) Company. Millions of euro Non-current Current Notional Fair value Notional Fair value at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 DERIVATIVE ASSETS Fair value hedge derivatives: - on interest rates - on exchange rates - on commodities Total Cash flow hedge derivatives: - on interest rates - on exchange rates - on commodities Total Trading derivatives: - on interest rates - on exchange rates - on commodities Total 12 166 - 178 335 11,705 1,628 13,668 50 - 322 372 12 171 - 183 404 8,318 1,126 9,848 50 197 261 508 7 25 - 32 26 1,081 215 1,322 2 - 27 29 6 19 - 25 12 675 262 949 2 4 25 31 TOTAL DERIVATIVE ASSETS 14,218 10,539 1,383 1,005 - - - - 133 2,717 3,081 5,931 - 3,399 17,203 20,602 26,533 15 66 - 81 427 4,689 1,428 6,544 - 4,057 20,553 24,610 31,235 - - - - - 132 847 979 - 34 3,052 3,086 4,065 1 3 - 4 1 252 494 747 - 51 3,112 3,163 3,914 Millions of euro Non-current Current Notional Fair value Notional Fair value at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 5 5 7,704 11,049 601 19,354 62 2 154 218 19,577 - - 8,605 13,025 656 22,286 478 191 133 802 23,088 1 1 779 1,560 47 2,386 6 - 14 20 2,407 - - 605 1,803 167 2,575 17 3 14 34 2,609 - - 65 2,573 1,613 4,251 100 1,679 17,650 19,429 23,680 - - 272 2,791 2,050 5,113 138 3,101 21,845 25,084 30,197 - - 1 115 457 573 79 38 2,864 2,981 3,554 - - 1 348 859 1,208 66 33 3,036 3,135 4,343 DERIVATIVE LIABILITIES Fair value hedge derivatives: - on exchange rates Total Cash flow hedge derivatives: - on interest rates - on exchange rates - on commodities Total Trading derivatives: - on interest rates - on exchange rates - on commodities Total TOTAL DERIVATIVE LIABILITIES 290 Consolidated Annual Report 201946.1 Derivatives designated as hedging instruments Derivatives are initially recognized at fair value, on the trade date of the contract and are subsequently re-measured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being relationship will be provided through a qualitative analysis; > on the other hand, if the underling risk of the hedging in- strument and the hedged item is not the same, the exist- ence of the economic relationship will be demonstrated through a quantitative method in addition to a qualitative analysis of the nature of the economic relationship (i.e., linear regression). hedged. Hedge accounting is applied to derivatives entered into in order to reduce risks such as interest rate risk, foreign ex- change rate risk, commodity price risk and net investments in foreign operations when all the criteria provided by IFRS 9 are met. At the inception of the transaction, the Group documents the relationship between hedging instruments and hedged items, as well as its risk management objectives and strate- gy. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether hedging in- struments are highly effective in offsetting changes in fair values or cash flows of hedged items. For cash flow hedges of forecast transactions designated as hedged items, the Group assesses and documents that they are highly probable and present an exposure to changes in cash flows that affect profit or loss. In order to demonstrate that the behavior of the hedging in- strument is in line with those of the hedged item, different scenarios will be analyzed. For hedging of commodity price risk, the existence of an eco- nomic relationship is deduced from a ranking matrix that de- fines, for each possible risk component a set of all standard derivatives available in the market whose ranking is based on their effectiveness in hedging the considered risk. In order to evaluate the credit risk effects, the Group con- siders the existence of risk mitigating measures (collateral, mutual break-up clauses, netting agreements, etc.). The Group has established a hedge ratio of 1:1 for all the hedging relationships (including commodity price risk hedg- ing) as the underlying risk of the hedging derivative is identi- cal to the hedged risk, in order to minimize hedging ineffec- Depending on the nature of the risks exposure, the Group tiveness. designates derivatives as either: > fair value hedges; or > cash flow hedges. For more details about the nature and the extent of risks arising from financial instruments to which the Group is ex- posed, please refer the note 44 “Risk management”. To be effective a hedging relationship shall meet all of the following criteria: The hedge ineffectiveness will be evaluated through a quali- tative assessment or a quantitative computation, depending on the following circumstances: > if the critical terms of the hedged item and hedging instru- ment match and there aren’t other sources of ineffective- ness included the credit risk adjustment on the hedging derivative, the hedge relationship will be considered fully effective on the basis of a qualitative assessment; > existence of an economic relationship between hedging > if the critical terms of the hedged item and hedging instru- instrument and hedged item; > the effect of credit risk does not dominate the value changes resulting from the economic relationship; > the hedge ratio defined at initial designation shall be equal to the one used for risk management purposes (i.e. same quantity of the hedged item that the entity actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge the quantity of the hedged item). ment do not match or there is at least one source of in- effectiveness, the hedge ineffectiveness will be quantified applying the dollar offset cumulative method with hypo- thetical derivative. This method compares changes in fair values of the hedging instrument and the hypothetical de- rivative between the reporting date and the inception date. The main causes of hedge ineffectiveness can be the fol- Based on the IFRS 9 requirements, the existence of an eco- lowings: nomic relationship is evaluated by the Group through a quali- tative assessment or a quantitative computation, depending of the following circumstances: > if the underlying risk of the hedging instrument and the hedged item is the same, the existence of an economic > basis differences (i.e. the fair value or cash flows of the hedged item depend on a variable that is different from the variable that causes the fair value or cash flows of the hedging instrument to change); > timing differences (i.e. the hedged item and hedging in- 291 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsstrument occur or are settled at different dates); (i.e., “basis adjustment”). > quantity or notional amount differences (i.e. the hedged When a hedging instrument expires or is sold, or when a item and hedging instrument are based on different quan- hedge no longer meets the criteria for hedge accounting, any tities or notional amounts); cumulative gain or loss existing in equity at that time remains > other risks (i.e. changes in the fair value or cash flows of in equity and is recognized when the forecast transaction is a derivative hedging instrument or hedged item relate to ultimately recognized in the income statement. When a fore- risks other than the specific risk being hedged); cast transaction is no longer expected to occur, the cumula- > credit risk (i.e. the counterparty credit risk differently im- tive gain or loss that was reported in equity is immediately pact the fair value movements of the hedging instruments transferred to the income statement. and hedge items). For hedging relationships using forward as hedging instru- ment, where only the change in the value of the spot ele- Fair value hedges Fair value hedges are used to protect the Group against expo- ment is designated as the hedging instrument, accounting for the forward element (profit or loss vs OCI) is defined case sures to changes in the fair value of assets, liabilities or firm by case. This approach is actually applied by the Group for commitment attributable to a particular risk that could affect hedging of foreign currency risk on renewables assets. profit or loss. Conversely, hedging relationships using cross currency inter- Changes in fair value of derivatives that qualify and are desig- est rate swaps as hedging instruments, the Group separates nated as hedging instruments are recognized in the income foreign currency basis spread, in designating the hedging de- statement, together with changes in the fair value of the rivative, and present them in other comprehensive income hedged item that are attributable to the hedged risk. (OCI) as hedging costs. If the hedge no longer meets the criteria for hedge account- With specific regard to cash flow hedges of commodity risk, ing, the adjustment to the carrying amount of a hedged item in order to improve their consistency with the risk manage- for which the effective interest rate method is used is amor- ment strategy, the Enel Group applies a dynamic hedge ac- tized to profit or loss over the period to maturity. counting approach based on specific liquidity requirements (the so-called liquidity-based approach). Cash flow hedges Cash flow hedges are applied in order to hedge the Group This approach requires the designation of hedges through the use of the most liquid derivatives available on the mar- exposure to changes in future cash flows that are attribut- ket and replacing them with others that are more effective in able to a particular risk associated with a recognized asset covering the risk in question. or liability or a highly probable transaction that could affect Consistent with the risk management strategy, the liquidi- profit or loss. ty-based approach allows the roll-over of a derivative by re- The effective portion of changes in the fair value of deriva- placing it with a new derivative, not only in the event of expiry tives that are designated and qualify as cash flow hedges is but also during the hedging relationship, if and only if the new recognized in other comprehensive income. The gain or loss derivative meets both of the following requirements: relating to the ineffective portion is recognized immediately > it represents a best proxy of the old derivative in terms of in the income statement. ranking; Amounts accumulated in equity are reclassified to profit > it meets specific liquidity requirements. or loss in the periods when the hedged item affects profit Satisfaction of these requirements is verified quarterly. or loss (for example, when the hedged forecast sale takes At the roll-over date, the hedging relationship is not discon- place). tinued. Accordingly, starting from that date, changes in the If the hedged item results in the recognition of a non-financial effective fair value of the new derivative will be recognized asset (i.e., property, plant and equipment or inventories, etc.) in shareholders’ equity (the cash flow hedge reserve), while or a non-financial liability, or a hedged forecast transaction changes in the fair value of the old derivative are recognized for a non-financial asset or a non-financial liability becomes through profit or loss. a firm commitment for which fair value hedge accounting is applied, the amount accumulated in equity (i.e., cash flow re- serve) shall be removed and included in the initial value (cost or other carrying amount) of the asset or the liability hedged 292 Consolidated Annual Report 201946.1.1 Hedge relationships by type of risk hedged Interest rate risk The following table shows the notional amount and the avera- ge interest rate of instruments hedging the interest rate risk on transactions outstanding at December 31, 2019 and De- cember 31, 2018, broken down by maturity. Millions of euro Maturity 2020 2021 2022 2023 2024 Beyond At Dec. 31, 2019 Interest rate swaps Total notional amount Notional amount related to IRS in euro Average IRS rate in euro Notional amount related to IRS in US dollars Average IRS rate in US dollars At Dec. 31, 2018 Interest rate swaps Total notional amount Notional amount related to IRS in euro Average IRS rate in euro Notional amount related to IRS in US dollars Average IRS rate in US dollars 199 47 3.1825 134 1.574 140 - - 134 2.035 499 143 187 187 170 170 7,054 6,042 4.9699 4.0516 4.1629 1.8298 356 3.523 - - - - 665 2.967 2019 2020 2021 2022 2023 Beyond 714 18 199 68 0.5444 2.7151 131 - - 396 396 697 697 7,598 7,298 2.7098 1.8872 1.9491 87 131 131 1.6208 1.5745 2.0359 - - - - 229 2.7943 The following table shows the notional amount and the fair transactions outstanding as at December 31, 2019 and De- value of the hedging instruments on the interest rate risk of cember 31, 2018, broken down by type of hedged item. Millions of euro Hedging instrument Hedged item Fair value hedges Interest rate swaps Fixed-rate bank borrowings Cash flow hedges Interest rate swaps Floating-rate bonds Interest rate swaps Floating-rate financial receivables Interest rate swaps Floating-rate non-bank borrowings Total Fair value Notional amount Fair value Notional amount Assets Liabilities Assets Liabilities at Dec. 31, 2019 at Dec. 31, 2018 7 11 15 - 33 - 12 (499) 3,953 - (281) (780) 140 4,144 8,249 7 1 7 5 20 - 12 (406) - (200) (606) 6,105 142 3,476 9,735 293 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsThe following table shows the notional amount and the fair ber 31, 2019 and December 31, 2018, broken down by type value of hedging derivatives on interest rate risk as at Decem- of hedge. Millions of euro Notional amount Fair value assets Notional amount Fair value liabilities Derivatives Fair value hedges Interest rate swaps Total Cash flow hedges Interest rate swaps Total TOTAL INTEREST RATE DERIVATIVES at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 12 12 468 468 480 27 27 831 831 858 7 7 26 26 33 7 7 13 13 20 - - 7,769 7,769 7,769 - - 8,877 8,877 8,877 - - 780 780 780 - - 606 606 606 The notional amount of derivatives classified as hedging in- notional amount of amortizing interest rate swaps. struments at December 31, 2019, came to €8,249 million, The deterioration in the fair value of €161 million mainly with a corresponding negative fair value of €747 million. reflects developments in the yield curve. Compared with December 31, 2018, the notional amount de- creased by €1,486 million, mainly reflecting: Fair value hedge derivatives > the early termination of pre-hedge interest rate swaps Net gains and losses recognized through profit or loss, amounting to €750 million in respect of Enel SpA’s “exchan- reflecting changes in the fair value of fair value hedge derivati- ge offer” for the repurchase of hybrid bonds expiring Ja- ves and the changes in the fair value of the hedged item that nuary 15, 2075 and January 10, 2074; are attributable to interest rate risk demonstrated that these > the early termination of pre-hedge interest rate swaps hedging relationships were totally effective both in 2019 and amounting to €2,000 million in respect of “sustainable” the previous year. bond issues during the year; > the expiry of interest rate swaps amounting to €714 mil- The following table shows the impact of fair value hedges of lion; interest rate risk in the balance sheet at December 31, 2019 > new interest rate swaps amounting to €1,745 million. and December 31, 2018. The value also reflects the reduction of €203 million in the Millions of euro 2019 2018 Interest rate swaps 12 7 7 27 7 7 Notional amount Carrying amount Fair value used to measure ineffectiveness in period Notional amount Carrying amount Fair value used to measure ineffectiveness in period 294 Consolidated Annual Report 2019The following table shows the impact of the hedged item of fair value hedges in the balance sheet at December 31, 2019 and December 31, 2018. Millions of euro 2019 2018 Cumulative adjustment of fair value of hedged item Fair value used to measure ineffectiveness in period 7 (7) Carrying amount 20 Cumulative adjustment of fair value of hedged item Fair value used to measure ineffectiveness in period 7 (7) Carrying amount 35 Fixed-rate borrowings Cash flow hedge derivatives The following table shows the cash flows expected in coming years from cash flow hedge derivatives on interest rate risk. Millions of euro Fair value Distribution of expected cash flows at Dec. 31, 2019 2020 2021 2022 2023 2024 Beyond Cash flow hedge derivatives on interest rates Positive fair value Negative fair value 26 1 (1) (2) (2) 2 32 (780) (102) (121) (110) (110) (94) (284) The following table shows the impact of cash flow hedges of interest rate risk in the balance sheet at December 31, 2019 and December 31, 2018. Millions of euro 2019 2018 Interest rate swaps Notional amount 8,237 Carrying amount (754) Fair value used to measure ineffectiveness in period (754) Notional amount 9,723 Carrying amount (593) Fair value used to measure ineffectiveness in period (593) The following table shows the impact of the hedged item of cash flow hedges in the balance sheet at December 31, 2019 and December 31, 2018. Millions of euro 2019 2018 Fair value used to measure ineffectiveness in period Cash flow hedge reserve Hedging costs reserve Floating-rate bonds Floating-rate financial receivables Floating-rate non-bank borrowings Total 486 (15) 275 746 (486) 15 (275) (746) - - - - Ineffective portion of carrying amount of CFH derivatives (2) - (6) (8) Fair value used to measure ineffectiveness in period Cash flow hedge reserve Hedging costs reserve 395 (7) 190 578 (395) 7 (190) (578) - - - - Ineffective portion of carrying amount of CFH derivatives (10) - (5) (15) 295 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsThe following table shows the impact of cash flow hedges of interest rate risk through profit or loss and other comprehensive income in the period, gross of tax effects: Millions of euro at Dec. 31, 2019 Interest rate hedges (121) 7 - 47 Gross changes in fair value through OCI Net gain/(loss) gross of tax effects through profit or loss for ineffectiveness Hedging costs through OCI Net gain/(loss) gross of tax effects through profit or loss for reclassification from OCI Exchange risk the instruments hedging exchange risk on transactions out- The following table reports the maturity profile of the notional standing at December 31, 2019 and December 31, 2018. amount and associated average contractual exchange rate for Millions of euro At Dec. 31, 2019 Cross currency interest rate swaps (CCIRS) Notional amount Notional amount for CCIRS EUR-USD Average exchange rate EUR/USD Notional amount for CCIRS EUR-GBP Average exchange rate EUR/GBP Notional amount for CCIRS EUR-CHF Average exchange rate EUR/CHF Notional amount for CCIRS USD-BRL Average exchange rate USD/BRL Currency forwards Notional amount Notional amount - currency forward EUR/USD 2,899 958 Average currency forward rate - EUR/USD 1.1774 1.1803 1.1609 Notional amount - currency forward USD/CLP Average currency forward rate - USD/CLP Notional amount - currency forward USD/BRL Average currency forward rate - USD/BRL Notional amount - currency forward EUR/ZAR Average currency forward rate - EUR/ZAR Notional amount - currency forward EUR/RUB Average currency forward rate - EUR/RUB 296 527 44 678.0443 680.0000 313 14 4.1274 4.1330 221 17.7856 181 74.1277 - - - - - - - - - - - - 2020 2021 2022 2023 2024 Beyond Total 831 1,115 1,781 3,339 3,146 12,511 22,723 - 202 1,781 3,339 1,336 8,904 15,562 1.1348 1.1213 1.2184 1.1039 1.2067 470 587 0.8466 0.8245 92 1.2169 - - 269 326 3.9273 3.4742 4,459 1,015 - - - - - - 18 18 - - - - - - - - - - - - - - - - - 999 3,041 5,097 0.8765 0.8062 207 120 419 1.0642 1.2100 - - - - - - - - - - - - - 288 883 3.5655 5,492 3,875 571 327 221 181 - - - - - - - - - - - Consolidated Annual Report 2019Millions of euro At Dec. 31, 2018 Cross currency interest rate swaps (CCIRS) 2019 2020 2021 2022 2023 Beyond Total Notional amount 2,474 855 934 1,746 3,274 13,149 22,432 - - - - 198 1,746 3,274 8,729 13,947 1.1348 1.1213 1.2184 1.1726 Notional amount for CCIRS EUR-USD Average exchange rate EUR/USD Notional amount for CCIRS EUR-GBP Average exchange rate EUR/GBP Notional amount for CCIRS EUR-CHF Average exchange rate EUR/CHF Notional amount for CCIRS USD-BRL Average exchange rate USD/BRL Currency forwards Notional amount 1,229 447 559 0.6753 0.8466 0.8245 - - 89 1.2170 - - 528 319 177 3.5679 3.5508 3.2948 5,070 1,512 44 44 Notional amount - currency forward EUR/USD 3,071 1,343 Average currency forward rate - EUR/USD 1.2014 1.2199 1.2392 Notional amount - currency forward USD/CLP Average currency forward rate - USD/CLP Notional amount - currency forward USD/BRL Average currency forward rate - USD/BRL Notional amount - currency forward EUR/ZAR Average currency forward rate - EUR/ZAR Notional amount - currency forward EUR/RUB Average currency forward rate - EUR/RUB 838 92 667.5891 667.5175 409 3.6958 - - 220 77 16.7884 18.0229 139 79.4094 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 3,846 6,081 0.8261 315 404 1.1133 94 1,118 3.1037 6,626 4,458 930 409 297 139 - - - - - - - - - - - 297 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsThe following table shows the notional amount and the fair sactions outstanding as at December 31, 2019 and December value of the hedging instruments on the exchange risk of tran- 31, 2018, broken down by type of hedged item. Millions of euro Hedging instrument Fair value hedges Cross currency interest rate swaps (CCIRS) Cross currency interest rate swaps (CCIRS) Cash flow hedges Cross currency interest rate swaps (CCIRS) Cross currency interest rate swaps (CCIRS) Cross currency interest rate swaps (CCIRS) Cross currency interest rate swaps (CCIRS) Cross currency interest rate swaps (CCIRS) Currency forwards Currency forwards Currency forwards Total Fair value Notional amount Fair value Notional amount Hedged item Assets Liabilities Assets Liabilities at Dec. 31, 2019 at Dec. 31, 2018 Fixed-rate borrowings in foreign currencies Floating-rate borrowings in foreign currencies Floating-rate borrowings in foreign currencies Fixed-rate borrowings in foreign currencies Floating-rate Bond in foreign currencies Fixed-rate Bond in foreign currencies Future cash flows denominated in foreign currencies Future cash flows denominated in foreign currencies Future commodity purchases denominated in foreign currencies Purchases of investment goods and other 24 - 55 - 6 (1) - (5) (4) (1) 171 - 999 72 302 7 15 37 85 47 - - (4) (2) - 87 150 525 793 346 1,022 (1,535) 20,877 598 (2,013) 20,234 - 3 (17) 302 (63) 811 - 4 (71) 297 (33) 1,089 124 (7) 3,462 114 (15) 4,298 3 (43) 1,219 42 (12) 1,241 1,237 (1,676) 28,215 949 (2,150) 29,060 Cash flow hedges and fair value hedges include: flows in currencies other than the euro, with a positive fair > CCIRSs with a notional amount of €21,120 million used to value of €57 million; hedge the exchange risk on fixed-rate debt denominated in > currency forwards with a notional amount of €1,219 million currencies other than the euro, with a negative fair value and a negative fair value of €40 million in respect of OTC of €495 million; transactions to mitigate the exchange risk on expected > CCIRSs with a notional amount of €1,603 million used to cash flows in currencies other than the currency of ac- hedge the exchange risk on floating-rate debt denomina- count connected with the purchase of investment goods ted in currencies other than the euro, with a positive fair in the renewables and infrastructure and networks sectors value of €38 million; (new generation digital meters), on operating expenses for > currency forwards with a notional amount of €4,273 million the supply of cloud services and on revenue from the sale used to hedge the exchange risk associated with purcha- of renewable energy. ses of natural gas, purchases of fuel and expected cash 298 Consolidated Annual Report 2019The following table reports the notional amount and fair value of foreign exchange derivatives at December 31, 2019 and De- cember 31, 2018, broken down by type of hedge. Millions of euro Derivatives Fair value hedges Currency forwards CCIRS Total Cash flow hedges Currency forwards CCIRS Total Notional amount Fair value assets Notional amount Fair value liabilities at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 - 166 166 - 237 237 - 25 25 3,253 11,169 14,422 4,302 8,705 13,007 130 1,083 1,213 - 22 22 160 767 927 - 5 5 - - - - (1) (1) - - - 2,238 11,384 13,622 2,326 (113) (61) 13,490 (1,562) (2,090) 15,816 (1,675) (2,151) TOTAL EXCHANGE RATE DERIVATIVES 14,588 13,244 1,238 949 13,627 15,816 (1,676) (2,151) The notional amount of CCIRSs at December 31, 2019 exchange risk, especially that associated with the US dollar, amounted to €22,723 million (€22,432 million at December is mainly due to purchases of natural gas, purchase of fuel 31, 2018), an increase of €291 million. Cross currency interest and cash flows in respect of investments. Changes in the no- rate swaps with a total value of €2,070 million expired, while tional amount are connected with normal developments in new derivatives amounted to €2,510 million, of which €1,336 operations. million in respect of bond issues denominated in US dollars in September 2019. The value also reflects developments in Fair value hedge derivatives the exchange rate of the euro against the main other curren- The following table reports net gains and losses recognized cies, which caused their notional amount to increase by €466 through profit or loss, reflecting changes in the fair value of million. fair value hedge derivatives and the changes in the fair value The notional amount of currency forwards at December 31, of the hedged item that are attributable to exchange risk for 2019 amounted to €5,491 million (€6,628 million at Decem- 2019 and the previous year. ber 31, 2018), a decrease of €1,137 million. The exposure to Millions of euro Interest rate hedging instruments Hedged item Ineffective portion 2019 2018 Net gain/(loss) Net gain/(loss) 1 (4) (3) 6 (6) - The following table shows the impact of fair value hedges of interest rate risk in the balance sheet at December 31, 2019 and December 31, 2018: Millions of euro 2019 2018 Cross currency interest rate swaps (CCIRS) 171 24 24 237 22 22 Notional amount Carrying amount Fair value used to measure ineffectiveness in period Notional amount Carrying amount Fair value used to measure ineffectiveness in period 299 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsThe following table shows the impact of the hedged item of fair value hedges in the balance sheet at December 31, 2019 and December 31, 2018. Millions of euro 2019 2018 Cumulative adjustment of fair value of hedged item Fair value used to measure ineffectiveness in period Carrying amount Cumulative adjustment of fair value of hedged item Fair value used to measure ineffectiveness in period Carrying amount Cross currency interest rate swaps (CCIRS) 171 21 (22) 228 22 (22) Cash flow hedge derivatives The following table shows the cash flows expected in coming years from cash flow hedge derivatives on exchange risk. Millions of euro Fair value Distribution of expected cash flows at Dec. 31, 2019 2020 2021 2022 2023 2024 Beyond Cash flow hedge derivatives on exchange rates Positive fair value Negative fair value 1,213 (1,675) 357 (43) 272 42 219 47 471 33 141 36 1,667 (66) The following table shows the impact of cash flow hedges of exchange risk in the balance sheet at December 31, 2019 and December 31, 2018. Millions of euro 2019 2018 Cross currency interest rate swaps (CCIRS) Currency forwards Total Notional amount Carrying amount 22,552 (479) 5,491 17 28,043 (462) Fair value used to measure ineffectiveness in period Notional amount Carrying amount Fair value used to measure ineffectiveness in period (345) 22,195 (1,323) 52 6,628 99 (293) 28,823 (1,224) (1,074) 136 (938) 300 Consolidated Annual Report 2019The following table shows the impact of the hedged item of cash flow hedges in the balance sheet at December 31, 2019 and December 31, 2018. Millions of euro 2019 2018 Fair value used to measure ineffectiveness in period Cash flow hedge reserve Hedging costs reserve Ineffective portion of carrying amount of CFH derivatives Fair value used to measure ineffectiveness in period Cash flow hedge reserve Hedging costs reserve Ineffective portion of carrying amount of CFH derivatives (49) 3 (5) 49 (3) 5 1 (1) - 378 (378) (135) 17 59 (119) (17) (59) 119 - (1) - 9 (9) (32) 293 (293) (168) - - - - - - (2) 1 (1) (32) (87) (47) 32 87 47 1 (4) - 1,169 (1,169) (246) 71 30 (100) (66) 938 (71) (30) 100 - 1 - 66 (36) (938) (284) - - - - - - (1) (1) (2) Floating-rate borrowings in foreign currencies Fixed-rate borrowings in foreign currencies Floating-rate bonds in foreign currencies Fixed-rate bonds in foreign currencies Future cash flows denominated in foreign currencies Future cash flows denominated in foreign currencies Future commodity purchases denominated in foreign currencies Purchases of investment goods and other Total The following table shows the impact of cash flow hedges of exchange risk through profit or loss and other comprehensive income in the period, gross of tax effects. Millions of euro at Dec. 31, 2019 Exchange rate hedges 834 1 116 189 Net gain/(loss) gross of tax effects through profit or loss for ineffectiveness Gross changes in fair value through OCI Hedging costs through OCI Net gain/(loss) gross of tax effects through profit or loss for reclassification from OCI 301 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsCommodity risk outstanding at December 31, 2019 and December 31, 2018, The following table reports the notional amount and average broken down by expiry. price of instruments hedging commodity risk for transactions Millions of euro At Dec. 31, 2019 Commodity swaps Notional value on power Average commodity swap price on power (€/MWh) Notional value on coal/shipping Average commodity swap price on coal/shipping ($/ton) Notional value on gas Average commodity swap price on gas (€/MWh) Commodity forwards/futures Notional value on power Average commodity forward/future price on power (€/MWh) Notional value on gas Average commodity forward/future price on gas (€/MWh) Notional value on CO2 Average commodity forward/future price on CO2 (€/ton) Notional value on oil Average commodity forward/future price on oil ($/bbl) Millions of euro At Dec. 31, 2018 Commodity swaps Notional value on power Average commodity swap price on power (€/MWh) Notional value on coal/shipping Average commodity swap price on coal/shipping ($/ton) Commodity forwards/futures Notional value on power Average commodity forward/future price on power (€/MWh) Notional value on gas Average commodity forward/future price on gas (€/MWh) Notional value on CO2 Average commodity forward/future price on CO2 (€/ton) Notional value on oil Average commodity forward/future price on oil ($/bbl) 2020 2021 2022 2023 2024 Beyond Total 703 47.7 253 62.4 13 3.0 726 50.5 1,869 15.9 217 18.0 988 64.8 123 20.5 - - 13 3.0 2 50.4 662 19.1 9 25.0 115 59.7 121 20.2 - - 13 3.0 - - 1 17.2 - - - - 135 20.2 - - 13 3.0 - - - - - - - - 128 20.2 - - 41 7.0 - - - - - - - - 1,922 253 159 728 2,532 226 1,103 712 20.7 - - 66 7.9 - - - - - - - - 2019 2020 2021 2022 2023 Beyond Total 765 52.8 582 85.0 436 61.1 352 24.1 213 13.4 1,170 71.4 234 44.2 47 78.9 16 54.4 390 20.0 67 7.8 226 68.8 90 19.4 82 19.0 96 19.0 494 19.0 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1,761 629 452 742 280 1,396 302 Consolidated Annual Report 2019The following table reports the notional amount and fair va- outstanding at December 31, 2019 and December 31, 2018, lue of instruments hedging interest rate risk on transactions broken down by type of commodity. Millions of euro Notional amount Fair value assets Notional amount Fair value liabilities at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 Derivatives Cash flow hedges Derivatives on power: - swaps - forwards/futures - options 1,301 1,249 280 - 293 - Total derivatives on power 1,581 1,542 234 34 - 268 7 - - 7 9 694 - 703 - 84 - 84 139 20 - 159 74 - - 74 - 222 - 222 - 301 - 301 756 621 448 - 1,069 512 159 - 671 (107) (44) - (227) (12) - (151) (239) 253 619 (54) (94) - - - - - - - - 253 619 (54) (94) 80 812 - 892 - - - - - 1,415 - (1) (298) - - (693) - 1,415 (299) (693) - 1 - 1 - - - - - - - - 2,214 2,706 (504) (1,026) - - - - 79 2,823 - 2,902 - 226 - 226 10 - - 10 - 723 - 723 - 279 - 279 4,709 2,554 1,062 Derivatives on coal/shipping: - swaps - forwards/futures - options Total derivatives on coal/shipping Derivatives on gas and oil: - swaps - forwards/futures - options Total derivatives on gas and oil Derivatives on CO2: - swaps - forwards/futures - options Total derivatives on CO2 TOTAL DERIVATIVES ON COMMODITIES The table reports the notional amount and fair value of deri- both purchases and sales, carried out for oil commodities and vatives hedging the price risk on commodities at December gas products with physical delivery (all-in-one hedges). 31, 2019 and at December 31, 2018, broken down by type of Cash flow hedge derivatives on commodities included in lia- hedge. bilities regard derivatives on gas and oil commodities in the The positive fair value of cash flow hedge derivatives on com- amount of €299 million, derivatives on power in the amount modities regards derivatives on gas and oil commodities in the amount of €703 million, derivatives on CO2 (€84 million), derivatives on power (€268 million) and, to a lesser extent, of €151 million and derivatives on coal (€54 million). Cash flow hedge derivatives hedges of coal purchases requested by the generation com- The following table shows the cash flows expected in coming panies in the amount of €7 million. The first category primarily years from cash flow hedge derivatives on commodity risk. regards hedges of fluctuations in the price of natural gas, for Millions of euro Fair value Distribution of expected cash flows Cash flow hedge derivatives on commodities Positive fair value Negative fair value at Dec. 31, 2019 2020 2021 2022 2023 2024 Beyond 1,062 662 (504) (400) 187 (79) 69 (12) 13 (3) 11 (3) 120 (7) 303 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsThe following table shows the impact of cash flow hedges of commodity risk in the balance sheet at December 31, 2019 and December 31, 2018. Millions of euro 2019 2018 Power swaps Coal/shipping swaps Gas and oil swaps Power forwards/futures Coal/shipping forwards/futures Gas and oil forwards/futures CO2 forwards/futures Total Notional amount Carrying amount Fair value used to measure ineffectiveness in period Notional amount Carrying amount Fair value used to measure ineffectiveness in period 1,922 253 159 728 - 3,635 226 6,923 127 (47) 8 (10) - 396 84 558 127 (47) 8 (10) - 396 84 558 1,761 629 - 452 - 2,138 280 5,260 (88) (20) - 8 - (471) 301 (270) (88) (20) - 8 - (471) 301 (270) The following table shows the impact of the hedged item of cash flow hedges in the balance sheet at December 31, 2019 and December 31, 2018. Millions of euro 2019 2018 Fair value used to measure ineffectiveness in period Cash flow hedge reserve Hedging costs reserve (110) 47 (404) (84) (551) 110 (47) 404 84 551 - - - - - Ineffective portion of carrying amount of CFH derivatives 7 - - - 7 Fair value used to measure ineffectiveness in period Cash flow hedge reserve Hedging costs reserve 82 20 471 (301) 272 (82) (20) (471) 301 (272) - - - - - Ineffective portion of carrying amount of CFH derivatives 2 - - - 2 Future transactions in power Future transactions in coal/shipping Future transactions in gas and oil Future transactions in CO2 Total The following table shows the impact of cash flow hedges of commodity risk through profit or loss and other comprehensive income in the period, gross of tax effects. Millions of euro at Dec. 31, 2019 Commodity price hedges 914 5 - 91 Net gain/(loss) gross of tax effects through profit or loss for ineffectiveness Gross changes in fair value through OCI Hedging costs through OCI Net gain/(loss) gross of tax effects through profit or loss for reclassification from OCI 304 Consolidated Annual Report 201946.2 Derivatives at fair value through profit or loss The following table shows the notional amount and the fair value of derivatives at FVTPL as at December 31, 2019 and December 31, 2018. Millions of euro Notional amount Fair value assets Notional amount Fair value liabilities at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 at Dec. 31, 2019 at Dec. 31, 2018 Derivatives at FVTPL: - derivatives on interest rates: - interest rate swaps - interest rate options - derivatives on exchange rates: - currency forwards - CCIRS - derivatives on commodities Derivatives on power: - swaps - forwards/futures - options Total derivatives on power Derivatives on coal: - swaps - forwards/futures - options 50 - 50 - 3,399 4,092 - - 282 5,353 3 5,638 162 - 1,070 6,260 15 7,345 311 201 - - - - Total derivatives on coal 311 201 Derivatives on gas and oil: - swaps - forwards/futures - options 1,259 9,782 315 896 11,894 225 Total derivatives on gas and oil 11,356 13,015 2 - 34 - - 25 403 2 430 69 - - 69 2 - 54 1 - 167 814 28 112 50 1,648 33 - 281 4,329 27 1,009 4,637 566 50 1,175 2,117 - 229 6,955 20 7,204 (80) (5) (37) - - (28) (155) (14) (79) (5) (18) (18) - (28) (1,016) (11) (197) (1,055) 56 - - 56 367 823 (80) (48) - - - - - - - - 367 823 (80) (48) 168 2,126 247 2,541 215 852 728 (97) (186) 1,640 11,047 12,712 (2,190) (1,531) 147 309 289 (273) (165) 2,002 12,208 13,729 (2,560) (1,882) Derivatives on CO2: - swaps - forwards/futures - options Total derivatives on CO2 Derivatives on other: - swaps - forwards/futures - options Total derivatives on other Embedded derivatives TOTAL DERIVATIVES - 185 - 185 4 6 - 10 25 - 243 - 243 9 1 - 10 - - 31 - 31 2 3 - 5 3 - 68 - 68 2 - - 2 - - 524 - 524 16 9 - 25 43 - 221 - 221 - 1 - 1 - - (32) - (32) (1) (4) - (5) (4) - (65) - (65) - - - - - 20,974 25,118 3,115 3,194 19,647 25,886 (3,000) (3,170) At December 31, 2019 the notional amount of trading deri- At December 31, 2019, the notional amount of derivatives on vatives on interest rates came to €212 million. The fair value exchange rates was €5,080 million. The overall decrease in of a negative €83 million deteriorated by €1 million on the their notional value and the decline in the associated net fair previous year, mainly due to developments in the yield curve. value of €3 million mainly reflected normal operations and de- 305 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsvelopments in exchange rates. for hedging purposes, did not meet the requirements for he- At December 31, 2019, the notional amount of derivatives on dge accounting. commodities came to €35,329 million. The fair value of tra- The “other” category includes hedges using weather derivati- ding derivatives on commodities classified as assets mainly ves. In addition to commodity risk, the Group companies are reflects the market valuation of hedges of gas and oil amoun- also exposed to changes in volumes associated with weather ting to €2,541 million and derivatives on power amounting to conditions (for example, temperature impacts the consump- €430 million. tion of gas and power). The fair value of trading derivatives on commodities classified Embedded derivatives, which are held by Enel Green Power as liabilities mainly regards hedges of gas and oil amounting North America, regard supplementary financial clauses in to €2,560 million and derivatives on power amounting to €197 more complex tax equity partnership agreements, which are million. used to finance investment in new renewable capacity. These values include transactions that, although established 306 Consolidated Annual Report 201947. Assets measured at fair value > Level 2, where the fair value is determined on basis of in- puts other than quoted prices included within Level 1 that The Group determines fair value in accordance with IFRS 13 are observable for the asset or liability, either directly (such whenever such measurement is required by the internatio- as prices) or indirectly (derived from prices); nal accounting standards as a recognition or measurement > Level 3, where the fair value is determined on the basis of criterion. unobservable inputs. Fair value is defined as the price that would be received to sell This note also provides detailed disclosures concerning the an asset or paid to transfer a liability, in an orderly transaction, valuation techniques and inputs used to perform these me- between market participants, at the measurement date (i.e., asurements. an exit price). To that end: The best proxy of fair value is market price, i.e. the current > recurring fair value measurements of assets or liabilities publically available price actually used on a liquid and active are those required or permitted by the IFRS in the balance market. sheet at the close of each period; The fair value of assets and liabilities is classified in accordan- > non-recurring fair value measurements are those required ce with the three-level hierarchy described below, depending or permitted by the IFRS in the balance sheet in particular on the inputs and valuation techniques used in determining circumstances. their fair value: For general information or specific disclosures on the accoun- > Level 1, where the fair value is determined on basis of ting treatment of these circumstances, please see note 2 “Ac- quoted prices (unadjusted) in active markets for identical counting policies and measurement criteria”. assets or liabilities that the entity can access at the mea- surement date; 307 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsThe following table shows, for each class of assets measu- of the reporting period and the level in the fair value hierarchy red at fair value on a recurring or non-recurring basis in the into which the fair value measurements of those assets are financial statements, the fair value measurement at the end classified. Millions of euro Non-current assets Current assets Notes Fair value Level 1 Level 2 Level 3 Fair value Level 1 Level 2 Level 3 Equity investments in other entities at FVOCI Securities at FVOCI Equity investments in other entities at FVTPL Financial assets from service concession arrangements at FVTPL Loans and receivables measured at fair value Fair value hedge derivatives: - on interest rates - on exchange rates Cash flow hedge derivatives: - on interest rates - on exchange rates - on commodities Trading derivatives: - on interest rates - on exchange rates - on commodities Inventories measured at fair value Assets classified as available for sale 26 26.1, 30.1 26 26 26 46 46 46 46 46 46 46 46 28 33 Contingent consideration 27, 31 64 416 8 2,362 354 7 25 26 1,081 215 2 - 27 - 101 96 4 416 - - - - - - - 29 - - 4 - - - 11 - - 2,362 49 - 8 - - 61 - - - 61 - - - 354 51 51 - - - 132 847 - 34 - - - - 288 - - 7 25 26 1,081 186 2 - 23 - - 69 - - - - - - - - - 101 27 - - - - - - - - 132 559 - 34 - - - - - - - - - - - - 3,052 1,056 1,994 42 - 51 40 - - 2 - 38 2 - - 13 The fair value of “equity investments in other entities at FVO- The fair value of derivative contracts is determined using the CI” is determined for listed companies on the basis of the official prices for instruments traded on regulated markets. quoted price set on the closing date of the year, while that The fair value of instruments not listed on a regulated market for unlisted companies is based on a reliable valuation of the is determined using valuation methods appropriate for each relevant assets and liabilities. type of financial instrument and market data as of the close of the period (such as interest rates, exchange rates, vola- “Financial service concession arrangements at FVOCI” con- tility), discounting expected future cash flows on the basis cern electricity distribution operations in Brazil, mainly by Enel of the market yield curve and translating amounts in curren- Distribuição Rio, Enel Distribuição Ceará and Enel Distribuição cies other than the euro using exchange rates provided by Goiás and are accounted for in accordance with IFRIC 12. Fair the World Markets Reuters (WMR) Company. For contracts value was estimated as the net replacement cost based on involving commodities, the measurement is conducted using the most recent rate information available and on the general prices, where available, for the same instruments on both re- price index for the Brazilian market. gulated and unregulated markets. “Loans and receivables measured at fair value” includes (re- In accordance with the new international accounting stan- cognized in level 3) the fair value of the receivable from the di- dards, in 2013 the Group included a measurement of credit sposal of Slovak Power Holding of €354 million at December risk, both of the counterparty (Credit Valuation Adjustment 31, 2019. The fair value is determined on the basis of the price or CVA) and its own (Debit Valuation Adjustment or DVA), in formula specified in the contract. order to adjust the fair value of financial instruments for the corresponding amount of counterparty risk. More specifically, 308 Consolidated Annual Report 2019 the Group measures CVA/DVA using a Potential Future Expo- date of the year, including the credit spreads of Enel SpA. sure valuation technique for the net exposure of the position The measurement of Enel’s financial derivatives is always and subsequently allocating the adjustment to the individual classified as level 1 or 2, as it is based on market inputs. financial instruments that make up the overall portfolio. All The only exception regards derivatives on weather indices of the inputs used in this technique are observable on the (weather derivatives), which are measured using certified market. historical data on the underlying variables. For example, an The notional amount of a derivative contract is the amount on HDD (“Heating Degree Days”) derivative on a given measure- which cash flows are exchanged. This amount can be expres- ment station indicated in the derivative contract is measured sed as a value or a quantity (for example tons, converted into at fair value by calculating the difference between the agreed euros by multiplying the notional amount by the agreed price). strike and the historical average of the same variable obser- Amounts denominated in currencies other than the euro are ved at the same station. The measurement of Enel’s weather converted into euros at the year-end exchange rates provided derivatives is classified as level 3. by the World Markets Reuters (WMR) Company. The notional amounts of derivatives reported here do not ne- cessarily represent amounts exchanged between the parties 47.1 Fair value of other assets For each class of assets not measured at fair value on a re- and therefore are not a measure of the Group’s credit risk curring basis but whose fair value must be reported, the fol- exposure. For listed debt instruments, the fair value is given lowing table reports the fair value at the end of the period and by official prices. For unlisted instruments the fair value is de- the level in the fair value hierarchy into which the fair value termined using appropriate valuation techniques for each ca- measurements of those assets are classified. tegory of financial instrument and market data at the closing Millions of euro Non-current assets Current assets Notes Fair value Level 1 Level 2 Level 3 Fair value Level 1 Level 2 Level 3 Loans and receivables Investment property Inventories 26, 30 19 28 401 154 - - 22 - 19 - - 382 132 - 1,418 - 54 - - - 1,286 - - 132 - 54 The table reports the fair value of investment property and in- by independent experts, who used different methods depen- ventories of real estate not used in the business in the amount ding on the specific assets involved. of €154 million and €54 million respectively. The amounts The most significant of the items is “loans and receivables”, were calculated with the assistance of appraisals conducted which essentially regards e-distribuzione and Enel SpA. 309 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements48. Liabilities measured at fair value The following table reports for each class of liabilities mea- of the reporting period and the level in the fair value hierarchy sured at fair value on a recurring or non-recurring basis in the into which the fair value measurements are categorized. financial statements the fair value measurement at the end Millions of euro Non-current liabilities Current liabilities Notes Fair value Level 1 Level 2 Level 3 Fair value Level 1 Level 2 Level 3 Fair value hedge derivatives: - on interest rates - on exchange rates - on commodities Cash flow hedge derivatives: - on interest rates - on exchange rates - on commodities Trading derivatives: - on interest rates - on exchange rates - on commodities 46 46 46 46 46 46 46 46 46 Contingent consideration 38, 42 - 1 - 779 1,560 47 6 - 14 53 - - - - - 7 - - 3 - - 1 - 779 1,560 40 6 - 11 5 - - - - - - - - 48 - - - 1 115 457 79 38 2,864 116 - - - - - 229 - - 1,047 - - - - 1 115 228 79 38 1,817 103 - - - - - - - - - 13 Contingent consideration regards a number of equity invest- was determined on the basis of the contractual terms and ments held by the Group in North America, whose fair value conditions. 48.1 Fair value of other liabilities For each class of liabilities not measured at fair value in the the level in the fair value hierarchy into which the fair value balance sheet but whose fair value must be reported, the fol- measurements of those liabilities are classified. lowing table reports the fair value at the end of the period and Notes Fair value Level 1 Level 2 Level 3 43.3.1 43.3.1 43.3.1 43.3.1 43.3.1 43.3.1 46,867 4,408 43,126 165 947 8,712 2,667 183 - - - - 3,741 4,243 947 8,712 2,667 183 63,784 43,291 20,493 - - - - - - - Millions of euro Bonds Fixed rate Floating rate Bank borrowings Fixed rate Floating rate Non-bank borrowings Fixed rate Floating rate Total 310 Consolidated Annual Report 2019 49. Related parties As an operator in the field of generation, distribution, tran- The table below summarizes the main types of transactions sport and sale of electricity and the sale of natural gas, Enel carried out with such counterparties. carries out transactions with a number of companies directly or indirectly controlled by the Italian State, the Group’s con- trolling shareholder. Related party Single Buyer Cassa Depositi e Prestiti Group ESO - Energy Services Operator EMO - Energy Markets Operator Leonardo Group Relationship Fully controlled (indirectly) by the Ministry for the Economy and Finance Directly controlled by the Ministry for the Economy and Finance Fully controlled (directly) by the Ministry for the Economy and Finance Fully controlled (indirectly) by the Ministry for the Economy and Finance Directly controlled by the Ministry for the Economy and Finance Nature of main transactions Purchase of electricity for the enhanced protection market Sale of electricity on the Ancillary Services Market (Terna) Sale of electricity transport services (Eni Group) Purchase of transport, dispatching and metering services (Terna) Purchase of postal services (Poste Italiane) Purchase of fuels for generation plants and natural gas storage and distribution services (Eni Group) Sale of subsidized electricity Payment of A3 component for renewable resource incentives Sale of electricity on the Power Exchange (EMO) Purchase of electricity on the Power Exchange for pumping and plant planning (EMO) Purchase of IT services and supply of goods In addition, the Group conducts essentially commercial tran- determined by the Regulatory Authority for Energy, Networks sactions with associated companies or companies in which it and the Environment. holds minority interests. Finally, note that within the framework of the Corporate Go- Finally, Enel also maintains relationships with the pension vernance rules that the Enel Group has adopted, which are funds FOPEN and FONDENEL, as well as Fondazione Enel discussed in detail in the report on corporate governance and Enel Cuore, an Enel non-profit company devoted to provi- and ownership structure available on the Company’s websi- ding social and healthcare assistance. te (www.enel.com), procedures have been implemented to All transactions with related parties were carried out on nor- ensure the transparency and procedural and substantive pro- mal market terms and conditions, which in some cases are priety of transactions with related parties. 311 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements The following tables summarize transactions with related standing at December 31, 2019 and December 31, 2018 and parties, associated companies and joint arrangements out- carried out during the period. Single Buyer - - - EMO 1,320 - - 2,661 3,009 - 3 - - 54 182 - - Cassa Depositi e Prestiti Group 2,733 1 1 1,372 2,338 4 11 14 ESO 255 5 - 4 4 1 - 1 Other 183 - - - 70 - - - Single Buyer EMO Cassa Depositi e Prestiti Group ESO Other personnel Total at Dec. 31, 2019 arrangements 31, 2019 statements % of total Key management Associates and joint Overall total at Dec. Total in financial - - - - - - - - 601 - - - - - - - 45 - - 23 - - - 92 - - - 250 - - - 573 - - 69 715 2 89 726 - - 16 354 125 9 - 15 - - 89 - - - 793 - - - - - - - 13 - - 1 - 6 - 18 - 1 9 164 35 4 Key management personnel Associates and joint Total 2019 arrangements Overall total 2019 % of total Total in financial statements - - - - - - - - - - - - - - - - - - - - - - - 4,491 6 1 7,046 2,466 190 11 15 646 - - - 182 715 8 89 - 1 25 768 160 13 313 10 87 143 151 45 - 31 15 250 8 27 143 1 - - 61 8 38 5 - - - 4,804 16 88 7,189 2,617 235 11 46 15 896 8 27 183 715 151 89 8 39 30 768 160 13 2,230 2,291 77,366 2,961 1,637 33,755 18,580 7,276 (733) 4,518 1,383 13,083 4,065 4,305 3,115 54,174 6,301 3,409 12,960 3,554 1,328 13,161 6.2% 0.5% 5.4% 21.3% 14.1% 3.2% -1.5% 1.0% 1.1% 6.8% 0.2% 0.6% 5.9% 1.3% 2.4% 2.6% 17.7% 0.2% 2.9% 0.2% Millions of euro Income statement Revenue from sales and services Other revenue and income Financial income Purchases of electricity, gas and fuel Costs for services and other materials Other operating expenses Net income/(expense) from commodity risk management Financial expense Millions of euro Balance sheet Non-current derivative assets Trade receivables Current derivative assets Other current financial assets Other current assets Long-term borrowings Non-current contract liabilities Current portion of long-term borrowings Trade payables Current derivative liabilities Current contract liabilities Other current liabilities Other information Guarantees issued Guarantees received Commitments 312 Consolidated Annual Report 2019 Millions of euro Income statement Revenue from sales and services Other revenue and income Financial income Purchases of electricity, gas and fuel materials Costs for services and other Other operating expenses Net income/(expense) from commodity risk management Financial expense Millions of euro Balance sheet Non-current derivative assets Trade receivables Current derivative assets Other current financial assets Other current assets Long-term borrowings Non-current contract liabilities Current portion of long-term borrowings Trade payables Current derivative liabilities Current contract liabilities Other current liabilities Other information Guarantees issued Guarantees received Commitments EMO 1,320 3,009 54 182 - - - - - - - - - - - - - - - 45 23 92 250 2,661 3 - - - - - - - - - - - - - - - - - - - - 2,733 1 1 1,372 2,338 4 11 14 573 69 715 2 89 726 - - - - - 16 354 125 9 ESO 255 5 - 4 4 1 - 1 - - - - - - - - - - - - 15 89 Other 183 70 - - - - - - - - - 1 - 6 - - 1 9 13 164 35 4 601 793 18 Single Buyer Cassa Depositi e Prestiti Group Key management personnel Total 2019 Associates and joint arrangements Overall total 2019 Total in financial statements % of total - - - - - - - - 4,491 6 1 7,046 2,466 190 11 15 313 10 87 143 151 45 - 31 4,804 16 88 7,189 2,617 235 11 46 77,366 2,961 1,637 33,755 18,580 7,276 (733) 4,518 6.2% 0.5% 5.4% 21.3% 14.1% 3.2% -1.5% 1.0% Single Buyer EMO ESO Other Cassa Depositi e Prestiti Group Key management personnel Total at Dec. 31, 2019 Associates and joint arrangements Overall total at Dec. 31, 2019 Total in financial statements % of total - - - - - - - - - - - - - - - - 646 - - 182 715 8 89 2,230 - 1 25 768 160 13 1,383 13,083 4,065 4,305 3,115 54,174 6,301 3,409 12,960 3,554 1,328 13,161 15 250 8 27 1 - 143 - 61 8 38 5 - - - 15 896 8 27 183 715 151 89 2,291 8 39 30 768 160 13 1.1% 6.8% 0.2% 0.6% 5.9% 1.3% 2.4% 2.6% 17.7% 0.2% 2.9% 0.2% 313 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements Key management personnel Associates and joint Total 2018 arrangements Overall total 2018 % of total Total in financial statements Key management Associates and joint Overall total at Dec. Total in financial personnel Total at Dec. 31, 2018 arrangements 31, 2018 statements % of total 192 1,085 - - - - - - - - - - - - - - - - - - - - - - 5,185 16 1 7,598 2,517 272 1 24 893 - - 164 804 6 89 - 25 9 736 151 36 2,866 202 22 58 139 127 - 9 31 52 21 1 - 80 58 35 60 - - - - - 5,387 38 59 7,737 2,644 272 10 55 2,924 52 21 165 804 86 89 35 25 69 736 151 36 73,037 2,538 1,715 37,264 18,406 1,769 532 4,392 13,587 3,914 5,160 2,983 48,983 1,901 3,367 13,387 4,343 1,095 12,107 7.4% 1.5% 3.4% 20.8% 14.4% 15.4% 1.9% 1.3% 8.0% 1.3% 0.4% 5.5% 1.6% 4.5% 2.6% 21.8% 0.8% 2.3% 0.6% Millions of euro Income statement Revenue from sales and services Other revenue and income Other financial income Purchases of electricity, gas and fuel Costs for services and other materials Other operating expenses Net income/(expense) from commodity risk management Financial expense Millions of euro Balance sheet Trade receivables Derivative assets Other current financial assets Other current assets Long-term borrowings Other non-current liabilities Current portion of long-term borrowings Trade payables Current derivative liabilities Current contract liabilities Other current liabilities Other information Guarantees issued Guarantees received Commitments Single Buyer - - - EMO 1,952 - - 3,228 3,234 - 6 - - Single Buyer - - - - - - - 871 - - - - - - 52 262 - - EMO 120 - - 8 - - - 160 - - 2 250 - - Cassa Depositi e Prestiti Group 2,622 6 1 1,136 2,299 4 1 16 Cassa Depositi e Prestiti Group 717 - - 10 804 - 89 983 - 11 7 354 135 29 ESO 389 7 - - 3 - - 8 ESO 20 - - 146 - - - 833 - - - - - - Other 222 3 - - 163 - - - Other 36 - - - - 6 - 19 - 14 - 132 16 7 In November 2010, the Board of Directors of Enel SpA ap- implementation of the provisions of Article 2391-bis of the proved a procedure governing the approval and execution Italian Civil Code and the implementing regulations issued by of transactions with related parties carried out by Enel SpA CONSOB. In 2019, no transactions were carried out for which directly or through subsidiaries. The procedure (available at it was necessary to make the disclosures required in the rules https://www.enel.com/investors/bylaws-rules-and-policies/ on transactions with related parties adopted with CONSOB transactions-with-related-parties/) sets out rules designed to Resolution no. 17221 of March 12, 2010, as amended. ensure the transparency and procedural and substantive pro- priety of transactions with related parties. It was adopted in 314 Consolidated Annual Report 2019Millions of euro Income statement Revenue from sales and services Other revenue and income Other financial income Purchases of electricity, gas and fuel materials Costs for services and other Other operating expenses Net income/(expense) from commodity risk management Financial expense Millions of euro Balance sheet Trade receivables Derivative assets Other current financial assets Other current assets Long-term borrowings Other non-current liabilities Current portion of long-term borrowings Trade payables Current derivative liabilities Current contract liabilities Other current liabilities Other information Guarantees issued Guarantees received Commitments EMO 1,952 3,234 52 262 EMO 120 8 160 2 250 - - - - - - - - - - - - - 2,622 6 1 1,136 2,299 4 1 16 717 - - - - 10 804 89 983 11 7 354 135 29 3,228 6 871 - - - - - - - - - - - - - - - - - - - ESO 389 7 - - - - 3 8 - - - - - - - - - - - ESO 20 146 833 Other 222 3 163 Other 36 6 19 14 132 16 7 - - - - - - - - - - - - Single Buyer Cassa Depositi e Prestiti Group Key management personnel Total 2018 Associates and joint arrangements Overall total 2018 Total in financial statements % of total - - - - - - - - 5,185 16 1 7,598 2,517 272 1 24 202 22 58 139 127 - 9 31 5,387 38 59 7,737 2,644 272 10 55 73,037 2,538 1,715 37,264 18,406 1,769 532 4,392 7.4% 1.5% 3.4% 20.8% 14.4% 15.4% 1.9% 1.3% Single Buyer Cassa Depositi e Prestiti Group Key management personnel Total at Dec. 31, 2018 Associates and joint arrangements Overall total at Dec. 31, 2018 Total in financial statements % of total - - - - - - - - - - - - - - 893 - - 164 804 6 89 2,866 - 25 9 736 151 36 13,587 3,914 5,160 2,983 48,983 1,901 3,367 13,387 4,343 1,095 12,107 192 1,085 52 21 1 - 80 - 58 35 - 60 - - - 52 21 165 804 86 89 2,924 35 25 69 736 151 36 8.0% 1.3% 0.4% 5.5% 1.6% 4.5% 2.6% 21.8% 0.8% 2.3% 0.6% 315 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements50. Government grants - Disclosure pursuant to Article 1, paragraphs 125-129, of Law 124/2017 Pursuant to Article 1, paragraphs 125-129, of Law 124/2017 The following disclosure includes payments in excess of as amended, the following provides information on grants €10,000 made by the same grantor/donor during 2019, even received from Italian public agencies and bodies, as well as if made through multiple financial transactions. They are reco- donations by Enel SpA and the fully consolidated subsidiaries gnized on a cash basis. to companies, individuals and public and private entities. The Pursuant to the provisions of Article 3-quater of Decree Law disclosure comprises: (i) grants received from Italian public 135 of December 14, 2018, ratified with Law 12 of February entities/State entities; and (ii) donations made by Enel SpA 11, 2019, for grants received, please refer to the information and Group subsidiaries to public or private parties resident or contained in the National Register of State Aid referred to in established in Italy. Grants received in millions of euro Financial institution/ Grantor Beneficiary Amount Note Article 52 of Law 234 of December 24, 2012. EU - DG Research Enel X Srl 0.06 Balance of grant for Flexiciency innovation project funded by H2020 EC Enel X Srl Emilia-Romagna Region e-distribuzione SpA 0.28 1.07 Advance on grant at signing of contract for 5G Solution research and innovation project funded by the EU Grant received under Decree Law 74/2012 - Funding for urgent measures for population affected by earthquakes of 20 and May 29, 2012 in Emilia-Romagna Min. Education, Universities & Research (MIUR) e-distribuzione SpA 0.18 Instalment of grant received for Internet of Energy project, funded under the Artemis - Joint Undertaking call. Puglia Region e-distribuzione SpA 0.02 Marche Region e-distribuzione SpA 0.09 SIMEST SpA Enel Green Power SpA 0.3 SIMEST SpA Enel Green Power SpA 0.42 Instalment of grant received for UCCSM-CLUSTER TECNOLOGICI project, funded under the DCF 2007-2013 “Cluster Tecnologici Regionali” - support for regional technology clusters Grant received under OCDPC no. 437/2017 funding for urgent civil protection measures in response to exceptional weather events affecting the regions of Lazio, Marche and Umbria in the 2nd Half of January 2017 Interest rate subsidy on loans for investments in foreign companies in which SIMEST holds an interest. Project Chucas (Costa Rica), funded under Article 4 of Law 100/1990 Interest rate subsidy on loans for investments in foreign companies in which SIMEST holds an interest. Project Talinay (Chile), funded under Article 4 of Law 100/1990 2.42 Total 316 Consolidated Annual Report 20190.04 2019 donation 0.04 2019 donation 0.04 2019 donation 0.04 2019 donation 0.03 2019 donation 0.04 2019 donation Beneficiary Ashoka Italy Onlus Amount Notes 0.08 Donation to support sustainable growth European University Institute 0.1 Donation to support research Fondazione Centro Studi Enel 0.05 Donation to support research and advanced training Fondazione Teatro del Maggio Musicale 0.4 2019 donation for cultural projects Fondazione MAXXI 0.6 2019 donation for cultural projects Fondazione Accademia Nazionale “Santa Cecilia” 0.65 2019 donation for cultural projects Elettrici senza frontiere Onlus 0.04 Donation for development energy Fondazione Teatro alla Scala 0.6 2019 donation for cultural projects Stichting Global Reporting Initiative 0.11 2019 donation Donations made in millions of euro Donor Enel SpA Enel SpA Enel SpA Enel SpA Enel SpA Enel SpA Enel SpA Enel SpA Enel SpA Enel SpA Enel SpA Fondazione Opes Onlus Enel Cuore Onlus Enel Global Trading SpA Enel Cuore Onlus Enel Italia SpA Enel Cuore Onlus Enel Italia SpA Enel Cuore Onlus 0.08 Balance of special 2018 donation Enel Italia SpA Fondazione Centro Studi Enel 0.04 Balance of 2018 donation Enel Italia SpA Fondazione Centro Studi Enel Enel X Srl Enel X Srl Enel Cuore Onlus Joint Research Lab per la mobilità urbana 0.1 2019 donation for participation in JRL for urban electric mobility Enel Produzione SpA Enel Cuore Onlus 0.06 Enel Cuore: 20% of 2019 special donation Enel Produzione SpA Enel Cuore Onlus 0.04 Enel Cuore: balance of 2018 special donation Enel Produzione SpA Fondazione Centro Studi Enel 0.16 50% of 2019 donation Enel Produzione SpA Fondazione Centro Studi Enel 0.03 Balance of 2018 donation Enel Produzione SpA Ente Zona Industria di Porto Marghera 0.02 2019 association dues Enel Produzione SpA ARTES 4.0 0.01 2019 association dues ARTES 4.0 Enel Produzione SpA Autorità di Sistema Portuale del Mare Adriatico Meridionale - Porto di Brindisi (Faro Porto) 0.03 Enel Produzione contribution to upgrade safety in Port of Brindisi, thereby supporting the city with an initiative with clear social and economic benefits Enel Produzione SpA Parrocchia Maria Ss. Addolorata di Tuturano 0.02 Renovation of football field of the Parish of Tuturano (in the municipality of Brindisi) Enel Energia SpA Fondazione Centro studi Enel 0.86 50% advance on 2019 donation Enel Energia SpA Fondazione Centro studi Enel 0.8 Balance on special 2018 donation Enel Energia SpA Enel Cuore Onlus 0.2 2019 donation for “Fare Scuola Nel Cuore del Punto Enel” Enel Energia SpA Enel Cuore Onlus 0.12 Donation for Enelpremia 3.0 ed. 2017/2018 Loyalty Enel Energia SpA Enel Cuore Onlus 0,04 2019 donation e-distribuzione SpA E.DSO - European Distribution System Operators 0.11 2019 association dues e-distribuzione SpA Enel Cuore Onlus 0.61 20% of 2019 donation e-distribuzione SpA Enel Cuore Onlus 2.6 80% balance of 2018 donation e-distribuzione SpA Fondazione Centro Studi Enel 1.66 50% 2019 donation e-distribuzione SpA Fondazione Centro Studi Enel 1.59 50% balance of 2018 donation Enel Green Power SpA Town of Patanna (TP) 0.01 Donation for restoration of artworks 12.05 Total 317 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements51. Contractual commitments and guarantees The commitments entered into by the Enel Group and the guarantees given to third parties are shown below. Millions of euro Guarantees given: at Dec. 31, 2019 at Dec. 31, 2018 Change - sureties and other guarantees granted to third parties 11,078 10,310 768 Commitments to suppliers for: - electricity purchases - fuel purchases - various supplies - tenders - other Total TOTAL 97,472 48,016 1,034 3,522 3,391 153,435 164,513 109,638 43,668 3,122 3,133 3,270 162,831 173,141 (12,166) 4,348 (2,088) 389 121 (9,396) (8,628) For more details on the expiry of commitments and guarantees, please see the section “Commitments to purchase commo- dities” in note 44. 52. Contingent assets and liabilities The following reports the main contingent assets and liabilities (and iii) convicted the remaining two defendants, sentencing at December 31, 2019, which are not recognized in the financial them with all the allowances provided for by law to nine mon- statements as they do not meet the requirements provided for ths’ imprisonment. With regard to payment of damages, the in IAS 37. Brindisi Sud thermal generation plant - Criminal proceedings against Enel employees A criminal proceeding was held before the Court of Brindisi concerning the Brindisi Sud thermal plant. A number of em- ployees of Enel Produzione – cited as a liable party in civil liti- gation – have been accused of causing criminal damage and dumping of hazardous substances with regard to the alleged contamination of land adjacent to the plant with coal dust as a result of actions between 1999 and 2011. At the end of 2013, the accusations were extended to cover 2012 and 2013. As part of the proceeding, injured parties, including the Province and City of Brindisi, have submitted claims for total damages of about €1.4 billion. In its decision of October 26, 2016, the Court of Brindisi: (i) acquitted nine of the thirteen defendan- ts (employees/managers of Enel Produzione) for not having committed the offense; (ii) ruled that it did not have to proce- ed as the offense was time-barred for two of the defendants; Court’s ruling also: (i) denied all claims of public parties and associations acting in the criminal proceeding to recover da- mages; and (ii) granted most of the claims filed by the priva- te parties acting to recover damages, referring the latter to the civil courts for quantification without granting a provisio- nal award. The convicted employees and the civil defendant, Enel Produzione, as well as by the employee for whom the expiry of period of limitations had been declared, appealed the conviction. On February 8, 2019, the Lecce Court of Ap- peal: (i) confirmed the trial court ruling regarding the criminal convictions of two Enel Produzione executives; (ii) denied the claims for damages of some private appellants; (iii) granted some claims for damages, which had been denied in the trial court, referring the parties, like the others – whose claims had been granted by the trial court – to the civil courts for quantifi- cation, without granting a provisional award; (iv) confirmed for the rest the ruling of the Court of Brindisi except for extending litigation costs to the Province of Brindisi, which had not been awarded damages at either the trial court or on appeal. With a subsequent ruling, the Court of Appeal of Lecce gran- ted the appeal lodged by the Province of Brindisi against the ruling, acknowledging that a material error had been made 318 Consolidated Annual Report 2019and therefore recognizing the generic entitlement of the Pro- petition Authority reached the conclusion that the preliminary vince to damages. The defendants filed an appeal against ru- findings did not provide sufficient evidence of any abusive ling with the Court of Cassation on June 22, 2019. conduct on the part of Enel Group companies. Criminal proceedings are also under way before the Courts SEN, EE and Enel appealed the ruling before the Lazio Regio- of Reggio Calabria and Vibo Valentia against a number of em- nal Administrative Court. With judgments issued on October ployees of Enel Produzione for the offense of illegal waste 17, 2019, the Lazio Regional Administrative Court: (i) partially disposal in connection with alleged violations concerning the granted the appeals of EE and SEN concerning the illegiti- disposal of waste from the Brindisi plant. Enel Produzione has macy of the determination of the penalty, which it has, as a not been cited as a liable party for civil damages. result, voided, ordering the Competition Authority to recalcu- The criminal proceedings before the Court of Reggio Calabria late of the sanction on the basis of specific parameters which ended with the hearing of June 23, 2016. The court acquitted were defined by the Lazio Regional Administrative Court in nearly all of the Enel defendants of the main charges becau- the final rulings, with particular regard to the substantial re- se no crime was committed. Just one case was dismissed duction in the period over which the alleged offense was said under the statute of limitations. Similarly, all of the remaining to have occurred; and (ii) denied Enel’s appeal relating only to charges involving minor offenses were dismissed under the the parental liability attributed to it as the parent company. The statute of limitations. The proceedings before the Court of three companies filed an appeal before the Council of State, Vibo Valentia are still pending and are currently in the testi- with EE and SEN, in particular, arguing that the reduction in mony phase, as the court ruled that the offenses could not the period of the alleged abuse referred to in the judgments be dismissed under the statute of limitations. At a hearing on of the Lazio Regional Administrative Court partially granting February 24, 2020, the Prosecution’s expert witness testified the appeals was not appropriate, while Enel argued that its and the proceedings will continue on April 27, 2020. petition should be granted in full. The Competition Authority Enel Energia and Servizio Elettrico Nazionale antitrust proceeding On May 11, 2017, the Competition Authority announced the beginning proceedings for alleged abuse of a dominant posi- tion under Article 102 of the Treaty on the Functioning of the European Union (TFEU) against Enel SpA (Enel), Enel Energia SpA (EE) and Servizio Elettrico Nazionale SpA (SEN), alleging, inter alia, that they had engaged in an exclusionary strategy, using a series of non-replicable commercial stratagems ca- pable of hindering their non-integrated competitors to the benefit of the Group’s company operating on the free market (EE). On December 20, 2018 the Competition Authority adopted its final ruling, subsequently notified to the parties on January 8, 2019, with which it levied a fine on Enel SpA, SEN and EE of €93,084,790.50, for abuse of a dominant position in violation of Article 102 of the TFEU. The disputed conduct consisted in the adoption of an exclu- sionary strategy through the illegitimate use of the data on regulated market customers acquired as part of the privacy consent mechanism for commercial purposes. With regard to other allegations made with the measure to initiate the proceeding, concerning the organization and per- formance of sales activities at physical locations (Enel Points and Enel Point Partner Shops) and winback policies, the Com- also filed a cross appeal against the rulings of the Lazio Regio- nal Administrative Court, asking for restoration of the original situation. Pending the preparation and notification of the appeals, on December 6, 2019, the Competition Authority, with its own measure notified on December 13, 2019, recalculated the pe- nalty, reducing it to €27,529,786.46. SEN, EE and Enel therefore notified the Competition Autho- rity and filed with the Council of State a petition to suspend enforcement of the penalty, even in its restated amount, re- questing the suspension of the related payment until the ap- peal was decided. At the pre-trial hearing, held on February 20, 2020, this petition was not discussed in consideration of the supervening action of the Council of State to set a date for the hearing of the arguments in the dispute and the con- sequent final decision for May 21, 2020. BEG litigation Following an arbitration proceeding initiated by BEG SpA in Italy, Enelpower obtained a ruling in its favor in 2002, which was upheld by the Court of Cassation in 2010, which enti- rely rejected the complaint with regard to alleged breach by Enelpower of an agreement concerning the construction of a hydroelectric power station in Albania. Subsequently, BEG, acting through its subsidiary Albania BEG Ambient, filed suit against Enelpower and Enel SpA in Albania concerning the 319 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsmatter, obtaining a ruling from the District Court of Tirana, Paris in order to render the ruling of the Albanian court enforce- upheld by the Albanian Court of Cassation, ordering Enel- able in France. Enel SpA and Enelpower SpA challenged the suit. power and Enel to pay tortious damages of about €25 million Following the beginning of the case before the Tribunal de for 2004 as well as an unspecified amount of tortious dama- Grande Instance, again at the initiative of BEG Ambient, ges for subsequent years. Following the ruling, Albania BEG between 2012 and 2013 Enel France was served with two Ambient demanded payment of more than €430 million from “Saise Conservatoire de Créances” (orders for the precautio- Enel. nary attachment of receivables) to conserve any receivables of Enel SpA in respect of Enel France. With a ruling of June 16, 2015, the first level was completed On January 29, 2018, the Tribunal de Grande Instance issued in the additional suit lodged by Enelpower SpA and Enel SpA a ruling in favor of Enel and Enelpower, denying Albania BEG with the Court of Rome asking the Court to ascertain the lia- Ambient Shpk the recognition and enforcement of the Tira- bility of BEG SpA for having evaded compliance with the arbi- na court’s ruling in France for lack of the requirements under tration ruling issued in Italy in favor of Enelpower SpA through French law for the purposes of granting exequatur. Among the legal action taken by Albania BEG Ambient Shpk. With this other issues, the Tribunal de Grande Instance ruled that: (i) action, Enelpower SpA and Enel SpA asked the Court to find the Albanian ruling conflicted with an existing decision, in this BEG liable and order it to pay damages in the amount that the case the arbitration ruling of 2002 and that (ii) the fact that other could be required to pay to Albania BEG Ambient Shpk BEG sought to obtain in Albania what it was not able to obtain in the event of the enforcement of the sentence issued by the in the Italian arbitration proceeding, resubmitting the same Albanian courts. With the ruling, the Court of Rome found that claim through Albania BEG Ambient Shpk, represented fraud. BEG SpA did not have standing to be sued, or alternatively, that Albania BEG Ambient Shpk appealed the ruling. The hearing the request was not admissible for lack of an interest for Enel before the Paris Court of Appeal is scheduled for June 9, 2020 SpA and Enelpower SpA to sue, as the Albanian ruling had not and briefs are being exchanged between the parties. yet been declared enforceable in any court. The Court ordered the setting off of court costs. Enel SpA and Enelpower SpA appealed the ruling before the Rome Court of Appeal, asking The Netherlands At the end of July 2014, Albania BEG Ambient Shpk filed suit that it be overturned in full. The next hearing, scheduled for No- with the Court of Amsterdam to render the ruling of the Alba- vember 13, 2019, was postponed until May 7, 2020. nian court enforceable in the Netherlands. On June 29, 2016, the court filed its judgment, which: (i) ruled that the Albanian On November 5, 2016, Enel SpA and Enelpower SpA filed a ruling meet the requirements for recognition and enforce- petition with the Albanian Court of Cassation, asking for the ment in the Netherlands; (ii) ordered Enel and Enelpower to ruling issued by the District Court of Tirana on March 24, 2009 pay €433,091,870.00 to Albania BEG Ambient Shpk, in ad- to be voided. The proceeding is still pending. dition to costs and ancillary charges of €60,673.78; and (iii) Proceedings undertaken by Albania BEG Ambient Shpk to obtain enforcement of the ruling of the District Court of Tirana of March 24, 2009 Albania BEG Ambient Shpk had initiated two proceedings re- denied Albania BEG Ambient Shpk’s request to declare the ruling provisionally enforceable. On June 29, 2016, Enel and Enelpower filed appeals against the ruling of the Court of Amsterdam issued on the same date. On September 27, 2016, Albania BEG Ambient also ap- pealed the court’s ruling of June 29, 2016, to request the re- versal of its partial loss on the merits. On April 11, 2017, the questing execution of the Albanian sentence before the cour- Amsterdam Court of Appeal granted the request of Enel and ts of the State of New York and Ireland, which both ruled in fa- Enelpower to join to two pending appeals. vor of Enel SpA and Enelpower SpA, respectively, on February In a ruling of July 17, 2018, the Amsterdam Court of Appeal 23 and February 26, 2018. Accordingly, there are no lawsuits upheld the appeal advanced by Enel and Enelpower, ruling pending in Ireland or New York State. that the Albanian judgment cannot be recognized and enfor- France In February 2012, Albania BEG Ambient filed suit against Enel ced in the Netherlands. The Court of Appeal found that the Albanian decision was arbitrary and manifestly unreasonable and therefore contrary to Dutch public order. For these rea- SpA and Enelpower SpA with the Tribunal de Grande Instance in sons, the court did not consider it necessary to analyze the 320 Consolidated Annual Report 2019additional arguments of Enel and Enelpower. gued for the acquittal of the employee of e-distribuzione SpA The proceeding before the Court of Appeal continued with (and, consequently, of the company pursuant to Legislative regard to the subordinate question raised by Albania BEG Am- Decree 231/2001), which was then confirmed by the acquittal bient Shpk in the appeal proceedings, with which it is asking ruling issued by the Court of Milan on January 23, 2020. the court to rule on the merits of the dispute in Albania and in particular the alleged non-contractual liability of Enel and Enel- power in the failure to build the plant in Albania. On Decem- Environmental incentives - Spain ber 3, 2019, the Amsterdam Court of Appeal issued a ruling Following the Decision of the European Commission of No- in which it quashed the trial court judgment of June 29, 2016, vember 27, 2017 on the issue of environmental incentives for rejecting any claim made by Albania BEG Ambient Shpk. The thermal power plants, the European Commission’s Directora- Court came to this conclusion after affirming its jurisdiction te-General for Competition opened an investigation pursuant over Albania BEG Ambient Shpk’s subordinate claim and re-a- to Article 108, paragraph 2, of the Treaty on the Functioning nalyzing the merits of the case under Albanian law. Enel and of the European Union (TFEU) in order to assess whether the Enelpower are therefore not liable to pay any amount to Al- environmental incentive for coal power plants provided for in bania BEG Ambient Shpk, which was in fact ordered by the Order ITC/3860/2007 represents State aid compatible with Court of Appeal to reimburse the appellant companies for the the internal market. According to a literal interpretation of that losses incurred in illegitimate conservative seizures, to be Decision, the Commission reached the preliminary conclu- quantified as part of a specific procedure, and the costs of sion that the incentive in question would constitute State aid the trial and appeal proceedings. On March 3, 2020, it was pursuant to Article 107, paragraph 1, of the TFEU, expressing learned that Albania BEG Ambient Shpk had filed an appeal doubts about the compatibility of the incentive with the in- with the Supreme Court of the Netherlands. ternal market while recognizing that the incentives are in line Luxembourg In Luxembourg, again at the initiative of Albania BEG Ambient with the European Union’s environmental policy. On April 13, 2018, Endesa Generación SA, acting as an interested third party, submitted comments contesting this interpretation, Shpk, J.P. Morgan Bank Luxembourg SA was also served with while on July 30, 2018, it was learned that Gas Natural had an order for the precautionary attachment of any receivables appealed the decision of the Commission. of Enel SpA. In parallel Albania BEG Ambient Shpk filed a claim to obtain enforcement of the ruling of the Court of Tira- na in that country. The proceeding is still under way and briefs Bono Social - Spain are being exchanged between the parties. No ruling has been With the rulings of October 24 and 25, 2016 and November issued. Violations of Legislative Decree 231/2001 On August 10, 2018, a direct summons for judgment was no- tified to e-distribuzione to appear before the Court of Milan on May 23, 2019. In addition to e-distribuzione SpA, the proce- eding involves one of its employees, as well as a number of third-party companies and their representatives, concerning alleged violations of Legislative Decree 231/2001 on the admi- nistrative liability of legal persons. The proceeding was initia- ted for the alleged commission of the crime of unauthorized handling of waste (Article 256 of the Uniform Environmental Code) and for the violation of the provisions of the Code of Cultural Heritage (Legislative Decree 42/2004) in relation to works to remove a power line. On January 16, 2020, the last hearing was held, in which the Milan prosecutor’s office ar- 2, 2016, the Spanish Supreme Court declared Article 45.4 of the Electricity Industry Law no. 24 of December 26, 2013 void for incompatibility with Directive 2009/72/EC of the Europe- an Parliament and of the Council of July 13, 2009, granting the appeals filed by Endesa against the obligation to finance the “Bono Social” (Social Bonus) mechanism. The Supreme Court recognized Endesa’s right to receive all amounts that had been paid to users, in addition to legal interest (equal to about €214 million), under the “Bono Social” system, provi- ded for in the law declared void by the Supreme Court. The government challenged these rulings of the Supreme Court, requesting that they be overturned, but the related appeals were denied. Subsequently, the government initiated two proceedings before the Constitutional Court requesting the reopening of the Supreme Court proceedings so that the lat- ter may ask for a preliminary ruling from the European Court of Justice. The Constitutional Court granted the appeals and a preliminary ruling on the petition before the European Court 321 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsof Justice is pending. The government has not requested the of about R$200,000 (about €46,000) as well as other dama- repayment of any sum so far. Furnas-Tractebel litigation - Brazil ges to be quantified at a later stage. Ampla appealed the ru- ling and the appeal was upheld by the Tribunal de Justiça. In response, on December 16, 2016, Cibran filed an appeal (recurso especial) before the Superior Tribunal de Justiça, and In 1998 the Brazilian company CIEN (now Enel CIEN) signed the proceeding is under way. an agreement with Tractebel for the delivery of electricity With regard to the second case, filed in 2006 and regarding from Argentina through its Argentina-Brazil interconnection the years from 1987 to 2002, on June 1, 2015, the courts is- line. As a result of Argentine regulatory changes introduced sued a ruling ordering Ampla to pay R$80,000 Brazilian (about as a consequence of the economic crisis in 2002, CIEN was €19,000) in non-pecuniary damages as well as R$96,465,103 unable to make the electricity available to Tractebel. In Octo- (about €23 million) in pecuniary damages, plus interest. On ber 2009, Tractebel sued CIEN, which submitted its defense. July 8, 2015 Ampla appealed the decision with the Tribunal de CIEN cited force majeure as a result of the Argentine crisis Justiça of Rio de Janeiro, which on November 6, 2019 issued as the main argument in its defense. Out of court, the Tracte- a ruling granting Ampla’s petition and denying all of Cibran’s bel has indicated that it plans to acquire 30% of the inter- claims. On November 25, 2019, Cibran appealed the ruling of connection line involved in the dispute. In March 2014, the the Tribunal de Justiça of Rio de Janeiro and the proceeding is court had granted CIEN’s motion to suspend the proceedings pending. Decisions at first instance are still pending with re- in view of the existence of other litigation pending betwe- gard to the remaining four suits. The value of all the disputes en the parties. On February 14, 2019, CIEN received notice is estimated at about R$524 million (about €116 million). of an order reopening the proceeding, with the beginning of expert witness operations. The amount involved in the dispu- te is estimated at about R$118 million (about €28 million), plus Coperva litigation - Brazil unspecified damages. As part of the project to expand the grid in rural areas of Brazil, For analogous reasons, in May 2010 Furnas had also filed suit in 1982 Companhia Energética do Ceará SA (Coelce), then against CIEN for failure to deliver electricity, requesting pay- owned by the Brazilian government and now an Enel Group ment of about R$520 million (about €124 million), in addition company, had entered into contracts for the use of the grids to unspecified damages, seeking to acquire ownership (in this of a number of cooperatives established specifically to pur- case 70%) of the interconnection line. The proceeding was sue the expansion project. The contracts provided for the pay- decided in CIEN’s favor with a ruling of the Tribunal de Justiça ment of a monthly fee by Coelce, which was also required to with a definitive ruling of October 18, 2019, which denied all maintain the networks. of the claims of Furnas. Cibran litigation - Brazil Those contracts, between cooperatives established in special circumstances and the then public-sector company, do not specifically identify the grids governed by the agreements, whi- ch has prompted a number of the cooperatives to sue Coelce Companhia Brasileira de Antibióticos (Cibran) has filed six asking for, among other things, a revision of the fees agreed suits against Ampla Energia e Serviços SA (Ampla) to obtain in the contracts. These actions include the suit filed by Coo- damages for alleged losses incurred as a result of the inter- perativa de Eletrificação Rural do V do Acarau Ltda (Coperva) ruption of electricity service by the Brazilian distribution com- with a value of about R$268 million (about €59 million). Coel- pany between 1987 and 2002, in addition to non-pecuniary ce was granted rulings in its favor from the trial court and the damages. The Court ordered a unified technical appraisal for court of appeal, but Coperva filed a further appeal (Embargo de those cases, the findings of which were partly unfavorable to Declaração), which was denied in a ruling of January 11, 2016. Ampla. The latter challenged the findings, asking for a new Coperva lodged an extraordinary appeal before the Superior study, which led to the denial of part of Cibran’s petitions. Tribunal de Justiça on February 3, 2016, which was granted on Cibran subsequently appealed the decision and the ruling was November 5, 2018 for the ruling issued in the previous appeal in favor of Ampla. (Embargo de Declaração). On December 3, 2018, Enel filed an The first suit, filed in 1999 and regarding the years from 1994 appeal (Agravo Interno) against this ruling of the Superior Tribu- to 1999, was adjudicated in September 2014 when the court nal de Justiça. The proceedings are currently pending. of first instance issued a ruling against Ampla, levying a fine 322 Consolidated Annual Report 2019AGM litigation - Brazil considered non-existent and denied Eletropaulo’s request to include additional components in rates. On September 9, In 1993, Celg Distribuiçao SA - Celg-D (today Enel Distribu- 2014, the administrative measure of ANEEL was suspended ição Goiás), the Association of Municipalities of Goiás (AGM), on a precautionary basis. The first-instance proceeding is in its the State of Goiás and the Banca de Goiás reached an agree- preliminary stages and the value of the suit is R$888 million ment (convenio) for the payment of municipal debts to Celg-D (about €196 million). through the transfer of the portion of ICMS - Imposto sobre Circulação de Mercadorias e Serviços (VAT) that the State would have transferred to those governments. In 2001 the Neoenergia arbitration - Brazil parties to the agreement were sued by the individual munici- On June 18, 2018, Neoenergia brought an arbitration action pal governments to obtain a ruling that the agreement was in- against Electropaulo (today Enel Distribuição São Paulo) befo- valid, a position then upheld by the Supreme Federal Court on re the Câmara de Arbitragem do Mercado (CAM) concerning the grounds of the non-participation of the local governments the investment agreement signed by the two companies on themselves in the agreement process. In September 2004, April 16, 2018. Neoenergia alleged unequal treatment of the Celg-D reached a settlement with 23 municipalities. Between participants in the procedure for the acquisition of Eletropau- 2007 and 2008, Celg-D was again sued on numerous occa- lo. On September 3, 2018, Neoenergia modified its claim, sions (there are currently 90 pending suits) seeking the re- abandoning its request for specific execution of the obligation stitution of amounts paid under the agreement. Despite the contained in the contract. The current claim is a request for ruling that the agreement was void, Celg-D argues that the damages for losses caused by alleged non-performance of payment of the debts on the part of the local governments is the investment agreement. A ruling is pending. On February legitimate, as electricity was supplied in accordance with the 27, an arbitration ruling was issued denying all of the claims supply contracts and, accordingly, the claims for restitution of of Neoenergia and ordering it to pay Electropaulo’s arbitration amounts paid should be denied. costs. The proceedings pending before the Goiás State Court inclu- de: (i) a suit filed by the Municipio de Aparecida de Goiânia, which is pending at the preliminary stage at first instance, Fortaleza - Brazil for an amount of approximately R$565 million (approximately Petroleo Brasileiro SA - Petrobras, as gas supplier for the For- €125 million); (ii) a suit filed by the Municipio de Quirinópolis, taleza plant (Central Geradora Termelétrica Fortaleza - CGTF) also pending at first instance for an amount of about R$303 in Brazil, announced its intention to terminate the contract million (about €67 million); (iii) a suit filed by the Municipio de between the parties on the grounds that the agreement was Anápolis, submitted to the court of first instance after a failed allegedly imbalanced financially in consideration of current attempt at conciliation between the parties, for an amount of market conditions. The contract was signed in 2003 as part approximately R$294 million (about €64 million). of the “Priority Thermal Generation Program” established by The total value of the suits is equal to about R$4 billion (about the Brazilian government in order to increase thermoelectric €894 million). It is important to emphasize that the contingent generation and the security of supply in the country. The pro- liability deriviing from this dispute is covered by the “Funac” gram established that the Brazilian government would act as provision established during the privatization of Celg-D. the guarantor of the supply of gas at regulated prices defined ANEEL litigation - Brazil by the Brazil’s Ministry of Finance, Mines and Energy. In order to guarantee the security of electricity supply in Bra- zil, CGTF initiated legal action in the ordinary courts against In 2014, Eletropaulo (today Enel Distribuição São Paulo) ini- Petrobras with a request for precautionary protection, obtai- tiated an action before the federal courts seeking to void the ning, at the end of 2017, a court injunction suspending the administrative measure of ANEEL (the National Electricity termination of the contract, which was declared still in force. Agency), which in 2012 retroactively introduced a negative Subsequently, on February 27, 2018, the court decided to coefficient to be applied in determining rates for the following extinguish the action initiated by CGTF before the ordinary regulatory period (2011-2015). With this provision, the Authori- courts and, consequently, to revoke the precautionary me- ty ordered the restitution of the value of some components of asure that had permitted the supply of gas. CGTF filed ap- the network previously included in rates because they were peals against these latest decisions on both a precautionary 323 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsand ordinary basis, obtaining a second favorable ruling that sequently extended the six-month time limit, and therefore, enabled the plant to operate for some time but which was in the absence of contrary court rulings the Quimbo plant is subsequently revoked. CGTF has challenged this decision, continuing to generate electricity as the oxygenation system confident that the courts will recognize Petrobras’ obligation installed by Emgesa has so far demonstrated that it can main- to perform the contract. The proceeding is still pending. tain the oxygen levels required by the court. At the end of January 2018, CGTF received an arbitration re- On March 22, 2018, ANLA and CAM jointly presented the final quest from Petrobras in relation to the disputes described report on the monitoring of water quality downstream of the above and no decision has yet been issued. dam of the El Quimbo hydroelectric plant. Both authorities Subsequently, a precautionary measure was obtained in favor of confirmed the compliance of Emgesa with the oxygen level CGTF, ordering the suspension of the payment of certain amoun- requirements. On June 15, 2018, Emgesa filed its final plea- ts by CGTF to Enel Ceará (the purchaser of the electricity). dings and is waiting for the court to issue its ruling. On October 25, 2018, another precautionary measure was obtained in favor of CGTF, ordering the restoration of Petrobras’ obligation to supply gas. The latter filed an appeal against this decision, which was denied. Petrobras then challenged this de- cision with a further appeal (Embargo de Declaração), which was also denied on December 5, 2019. On January 27, 2020, Petro- bras filed two different types of extraordinary appeal before the Supreme Court and the Federal Court of Brasilia, respectively, to contest this decision. The proceedings are currently pending. El Quimbo - Colombia A number of legal actions (“acciones de grupo” and “accio- nes populares”) brought by residents and fishermen in the af- fected area are pending with regard to the El Quimbo project for the construction of a 400 MW hydroelectric plant in the region of Huila (Colombia). More specifically, the first acción de grupo, currently in the preliminary stage, was brought by around 1,140 residents of the municipality of Garzón, who claim that the construction of the plant would reduce their business revenue by 30%. A second action was brought, between August 2011 and December 2012, by residents and businesses/associations of five municipalities of Huila clai- ming damages related to the closing of a bridge (Paso El Co- legio). With regard to acciones populares, or class action law- suits, in 2008 a suit was filed by a number of residents of the area demanding, among other things, that the environmental permit be suspended. Another acción popular was brought by a number of fish farming companies over the alleged im- pact that filling the Quimbo basin would have on fishing in the Betania basin downstream from Quimbo. After a num- ber of precautionary rulings, on February 22, 2016, the Huila court issued a ruling allowing generation to continue for six months. The court ordered Emgesa to prepare a technical de- sign that would ensure compliance with oxygen level requi- rements and to provide collateral of about 20,000,000,000 Colombian pesos (about €5.5 million). The Huila court sub- 324 Nivel de Tensión Uno proceedings - Colombia This dispute involves an “acción de grupo” brought by Cen- tro Médico de la Sabana hospital and other parties against Codensa seeking restitution of allegedly excess rates. The action is based upon the alleged failure of Codensa to apply a subsidized rate that they claim the users should have paid as Tensión Uno category users (voltage of less than 1 kV) and owners of infrastructure, as established in Resolution no. 82/2002, as amended by Resolution no. 97/2008. The suit is at a preliminary stage. The estimated value of the proceeding is about 337 billion Colombian pesos (about €96 million). Arbitration proceedings in Colombia On October 8, 2018 the Grupo Energía de Bogotá (GEB) (whi- ch holds about 51.5% of Emgesa and Codensa) announced that it had started arbitration proceedings before the Cen- tro de Arbitraje y Conciliación de la Cámara de Comercio de Bogotá against Enel Américas SA for an alleged breach of contract in relation to the non-distribution of dividends in the 2016, 2017 and 2018 financial years for the companies Emge- sa and Codensa and for the failure to comply with certain pro- visions of the shareholders’ agreement. The GEB is claiming damages of about €514 million plus interest. The procedure is in the preliminary phase. In parallel, GEB also initiated, respectively, 17 arbitration pro- ceedings against Codensa and 20 against Emgesa, for a total of 37 pending disputes (now joined into two separate proce- edings for each company), in an attempt to void the decisions of the Junta Directiva and shareholders’ meetings of the de- fendant companies for alleged violation of mandatory rules, defect of absolute nullity for illegality of motive and subject Consolidated Annual Report 2019matter and alleged violation of shareholders’ agreements. The both VV and MH Manazment filed two suits in the Slovakian value of the disputes is undetermined and the proceedings courts to void the VEG Indemnity Agreement owing to the al- are both in the preliminary phase. leged connection of the latter with the VEG Operating Agree- Gabcˇíkovo dispute - Slovakia ment. These proceedings were joindered and, on September 27, 2017, a hearing was held before the Court of Bratislava in which the judge denied the request of the plaintiffs for pro- Slovenské elektrárne (“SE”) is involved in a number of cases cedural reasons. Both VV and MH Manazment appealed that before the national courts concerning the 720 MW Gabcˇíkovo decision. A decision is pending in the first proceeding initiated hydroelectric plant, which is administered by Vodohospodárs- by VV, while the appeal filed by MH Manazment was denied ka Výsatavba Štátny Podnik (“VV”) and whose operation and by the Bratislava Court of Appeal on June 8, 2019, upholding maintenance, as part of the privatization of SE in 2006, had the decision of the court of first instance in favor of SE. At been entrusted to SE for a period of 30 years under a manage- the local level, SE was sued by VV for alleged unjustified en- ment agreement (the VEG Operating Agreement). richment (estimated at about €360 million plus interest) for Immediately after the closing of the privatization, the Public the period from 2006 to 2015. SE filed counter-claims for all Procurement Office (PPO) filed suit with the Court of Brati- of the proceedings under way and, in particular: (i) for 2006, slava seeking to void the VEG Operating Agreement on the 2007 and 2008, at the hearing of June 26, 2019, the Court basis of alleged violations of the regulations governing public of Bratislava denied the claims of both parties for procedural tenders, qualifying the contract as a service contract and as reasons. The ruling in first instance was appealed by both VV such governed by those regulations. In November 2011 the and SE and briefs are being exchanged; (ii) for the proceeding trial court ruled in favor of SE, whereupon the PPO immedia- regarding 2011, a date for the hearing has yet to be set; (iii) tely appealed the decision. with regard to the proceeding involving 2012, at the hearing of In parallel with the PPO action, VV also filed a number of sui- April 24, 2019, the Court denied the petition of VV, which filed ts, asking in particular for the voidance of the VEG Operating an appeal on June 21, 2019 and the appeal is under way; (iv) Agreement. for the proceedings concerning 2010 and 2013, the hearing of On December 12, 2014, VV withdrew unilaterally from the the court of first instance has been set for March 10, 2020. Fi- VEG Operating Agreement, notifying its termination on Mar- nally, in another proceeding before the Court of Bratislava, VV ch 9, 2015, for breach of contract. On March 9, 2015, the de- asked for SE to return the fee for the transfer from SE to VV cision of the appeals court overturned the ruling of the trial of the technology assets of the Gabcˇíkovo plant as part of the court and voided the contract as part of the action pursued by privatization, with a value of about €43 million plus interest. the PPO. SE lodged an extraordinary appeal against that deci- The parties exchanged briefs. At the hearing on November sion before the Supreme Court. At a hearing of June 29, 2016, 19, 2019, the court issued a preliminary decision on the case the Supreme Court denied the appeal. SE then appealed the in which it noted the lack of standing of VV. The hearing was ruling to the Constitutional Court, which denied the appeal on adjourned until March 12, 2020 and deadlines have been set January 18, 2017. for a further exchange of briefs by the parties. In addition, SE lodged a request for arbitration with the Vien- na International Arbitral Centre (VIAC) under the VEG Indem- nity Agreement. Under that accord, which had been signed as part of the privatization between the National Property Fund (now MH Manazment) of the Slovak Republic and SE, the latter is entitled to an indemnity in the event of the early termination of the VEG Operating Agreement for reasons not attributable to SE. The arbitration court rejected the objection that it did not have jurisdiction and the arbitration proceeding continued to examine the merits of the case, with a ruling on the amount involved being deferred to any subsequent proce- eding. On June 30, 2017, the arbitration court issued its ruling denying the request of SE. In parallel with the arbitration proceeding launched by SE, Precautionary administrative proceeding and Chucas arbitration PH Chucas SA (Chucas) is a special purpose entity establi- shed by Enel Green Power Costa Rica SA after it won a tender organized in 2007 by the Instituto Costarricense de Electrici- dad (ICE) for the construction of a 50 MW hydroelectric plant and the sale of the power generated by the plant to ICE under a build, operate and transfer contract (BOT). On May 27, 2015, under the provisions of the BOT contract, Chucas initiated an arbitration proceeding before the Cám- 325 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsara Costarricense-Norteamericana de Comercio (AMCHAM CICA) seeking reimbursement of the additional costs incurred to build the plant and as a result of the delays in completing Tax litigation in Brazil the project as well as voidance of the fine levied by ICE for alleged delays in finalizing the works. In a decision issued in Withholding tax - Ampla In 1998, Ampla Energia e Serviços SA (Ampla) financed the December 2017, the arbitration board ruled in Chucas’ favor, acquisition of Coelce with the issue of bonds in the amount granting recognition of the additional costs in the amount of of $350 million (“Fixed Rate Notes” - FRN) subscribed by its about $113 million (about €91 million) and legal costs and ru- Panamanian subsidiary, which had been established to raise ling that the fines should not be paid. ICE appealed the arbi- funds abroad. Under the special rules then in force, subject to tration ruling in the local courts and on September 5, 2019 maintaining the bond until 2008, the interest paid by Ampla Chucas was notified of the ruling upholding the ICE’s appeal to its subsidiary was not subject to withholding tax in Brazil. to void the arbitration ruling for a number of formal procedural However, the financial crisis of 1998 forced the Panamanian reasons. On September 11, 2019, Chucas filed a “recurso de company to refinance itself with its Brazilian parent, which aclaración y adición” with the same court and is awaiting a for that purpose obtained loans from local banks. The tax au- decision. GasAtacama Chile - Chile thorities considered this financing to be the equivalent of the early extinguishment of the bond, with the consequent loss of entitlement to the exemption from withholding tax. In December 2005, Ampla carried out a spin-off that invol- On August 4, 2016, the Superintendencia de Electricidad y ved the transfer of the residual FRN debt and the associated Combustibles (SEC) fined GasAtacama Chile $8.3 million rights and obligations to Ampla Investimentos e Serviços SA. (about 5.8 billion Chilean pesos) for information provided by On November 6, 2012, the Câmara Superior de Recursos the latter to the CDEC-SING (Centro de Despacho Económico Fiscais (the highest level of administrative courts) issued a de Carga) between January 1, 2011 and October 29, 2015, ruling against Ampla, for which the company promptly asked relating to the Minimum Technical and Minimum Operating that body for clarifications. On October 15, 2013, Ampla was Time variables at the Atacama plant. notified of the denial of the request for clarification (Embar- GasAtacama Chile appealed this measure with the SEC, go de Declaração), thereby upholding the previous adverse which denied the appeal on November 2, 2016. GasAtacama decision. The company provided security for the debt and on Chile appealed this decision before the Santiago Court of Ap- June 27, 2014 continued litigation before the ordinary courts peal, which on April 9, 2019, issued a ruling reducing the fine (Tribunal de Justiça). to about $432,000 (about 290 million Chilean pesos). Both In December 2017, the court appointed an expert to examine GasAtacama Chile and the SEC have appealed this decision the issue in greater detail in support of the future ruling. In before the Supreme Court of Chile. On June 28, 2019, a he- September 2018, the expert submitted a report, requesting aring was held for both parties to submit arguments and on additional documentation. January 15, 2020 the Supreme Court upheld the ruling of the In December 2018, the company provided the additional do- Santiago Court of Appeal, leaving unchanged the reduction in cumentation and is awaiting the court’s assessment of the the fine established by that court. arguments and documents presented. In parallel, GasAtacama Chile also filed an appeal before the The amount involved in the dispute at December 31, 2019 Constitutional Court, claiming that the legal provisions under was about €288 million. which the SEC imposed the fine had been repealed at the time the penalty was issued. On July 17, 2018, the Constitu- tional Court rejected GasAtacama Chile’s appeal. PIS - Eletropaulo In July 2000, Eletropaulo filed suit seeking a tax credit for PIS In relation to this issue, some operators of the Sistema In- (Programa Integração Social) paid in application of regulations terconectado del Norte Grande (SING), including Aes Gener (Decree Laws 2.445/1988 and 2.449/1988) that were sub- SA, Eléctrica Angamos SA and Engie Energía Chile SA, have sequently declared unconstitutional by the Supremo Tribunal initiated actions in order to obtain damages in an amount of Federal (STF). In May 2012, the Superior Tribunal de Justiça about €58 million (the former) and about €141 million (the lat- (STJ) issued a final ruling in favor of the company that reco- ter two). The disputes were joindered in part in a single proce- gnized the right to the credit. eding and are currently in the preliminary phase. In 2002, before the issue of that favorable final ruling, the 326 Consolidated Annual Report 2019company had offset its credit against other federal taxes. This the appropriateness of the accounting treatment. behavior was contested by the federal tax authorities but the The overall amount involved in the dispute at December 31, company, claiming it had acted correctly, challenged in court 2019 was about €71 million. the assessments issued by the federal tax authorities. Fol- lowing defeat at the initial level of adjudication, the company appealed. Tax litigation - PIS - Eletropaulo In December 1995, the Brazilian government increased the The amount involved in the dispute at December 31, 2019 rate of the federal PIS (Programa Integração Social) tax from was about €145 million. 0.50% to 0.65% with the issue of a provisional measure (Exe- cutive Provisional Order). ICMS - Ampla, Coelce and Eletropaulo The States of Rio de Janeiro, Ceará and São Paulo issued a Subsequently, the provisional measure was re-issued five ti- mes before its definitive ratification into law in 1998. Under number of tax assessments against Ampla Energia e Serviços Brazilian legislation, an increase in the tax rate (or the establish- SA (for the years 1996-1999 and 2007-2017), Companhia Ener- ment of a new tax) can only be ordered by law and take effect gética do Ceará (2003, 2004 and 2006-2012) and Eletropaulo 90 days after its publication. (2008-2018), challenging the deduction of ICMS (Imposto so- Eletropaulo therefore filed suit arguing that an increase in the bre Circulação de Mercadorias e Serviços) in relation to the pur- tax rate would only have been effective 90 days after the last chase of certain non-current assets. The companies challenged Provisional Order, claiming that the effects of the first four pro- the assessments, arguing that they correctly deducted the tax visional measures should be considered void (since they were and asserting that the assets, the purchase of which generated never ratified into law). This dispute ended in April 2008 with the ICMS, are intended for use in their electricity distribution recognition of the validity of the increase in the PIS rate starting activities. from the first provisional measure. The companies are continuing to defend their actions at the In May 2008, the Brazilian tax authorities filed a suit against various levels of adjudication. Eletropaulo to request payment of taxes corresponding to the The amount involved in the disputes totaled approximately €98 rate increase from March 1996 to December 1998. Eletropau- million at December 31, 2019. lo has fought the request at the various levels of adjudication, arguing that the time limit for the issue of the notice of asses- Withholding tax - Endesa Brasil On November 4, 2014, the Brazilian tax authorities issued an sment had lapsed. In particular, since more than five years have passed since the taxable event (December 1995, the date of assessment against Endesa Brasil SA (now Enel Brasil SA) alle- the first provisional measure) without issuing any formal instru- ging the failure to apply withholding tax to payments of allege- ment, the right of the tax authorities to request the payment of dly higher dividends to non-resident recipients. additional taxes and the authority to undertake legal action to More specifically, in 2009, Endesa Brasil, as a result of the obtain payment have been challenged. first-time application of the IFRS-IAS, had cancelled goodwill, In 2017, following the unfavorable decisions issued in previous recognizing the effects in equity, on the basis of the correct ap- rulings, Eletropaulo filed an appeal in defense of its rights and plication of the accounting standards it had adopted. The Brazi- its actions with the Superior Tribunal de Justiça (STJ) and the lian tax authorities, however, asserted – during an audit – that Supremo Tribunal Federal (STF). The proceedings are still pen- the accounting treatment was incorrect and that the effects of ding while the amounts subject to dispute have been covered the cancellation should have been recognized through profit or by a bank guarantee. loss. As a result, the corresponding value (about €202 million) With regard to the request of the Office of the Attorney Ge- was reclassified as a payment of income to non-residents and, neral of the Brazilian National Treasury Department to replace therefore, subject to withholding tax of 15%. the bank guarantee with a deposit in court, the court of second It should be noted that the accounting treatment adopted by instance granted the petition. The company therefore replaced the company was agreed with the external auditor and also the bank guarantee with a cash deposit and filed a clarification confirmed by a specific legal opinion issued by a local firm. motion against the related decision, which is currently awaiting The first two levels of the administrative courts ruled for the tax a decision. authorities. At the third level of jurisdiction the company’s ap- The total value of the suit at December 31, 2019 was about peal was denied for formal reasons, a ruling that the company €54 million. opposed and will continue its defend its actions in court and 327 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsICMS - Coelce The State of Ceará has filed various tax assessments against Companhia Energética do Ceará SA over the years (for tax pe- riods from 2005 to 2014), contesting the determination of the deductible portion of the ICMS (Imposto sobre Circulação de Mercadorias e Serviços) and in particular the method of calcu- lation of the pro-rata deduction with reference to the revenue deriving from the application of a special rate envisaged by the Brazilian government for the sale of electricity to low-income households (Baixa Renda). The company has appealed the individual assessments, ar- guing that the tax deduction was calculated correctly. The com- pany is defending its actions in the various levels of jurisdiction. The total value of the suits at December 31, 2019 was about €50 million. FINSOCIAL - Eletropaulo Following a final ruling issued by the Federal Regional Court on September 11, 2011, Eletropaulo was recognized the right to compensation for certain FINSOCIAL credits (social contri- butions) relating to sums paid from September 1989 to March 1992. Despite the expiration of the relative statute of limitations, the Federal Tax Authority contested the determination of some credits and rejected the corresponding offsetting, issuing tax assessments that the company promptly challenged in the ad- ministrative courts, defending the legitimacy of its calculations and actions. After an unfavorable ruling at first instance, the company filed an appeal before the administrative court of second instance. the issues for which an unfavorable outcome is considered possible amounted to about €149 million at December 31, 2019: (i) Enel Iberia is defending the appropriateness of the criterion adopted for determining the deductibility of capital losses deriving from stock sales (around €103 million) and certain financial charges (around €17 million); (ii) Endesa and its subsidiaries are mainly defending the appropriateness of the criteria adopted for the deductibility of certain financial charges (about €23 million) and costs for decommissioning nuclear power plants (about €6 million). Income taxes - Enel Green Power España SL On June 7, 2017, the Spanish tax authorities issued a notice of assessment to Enel Green Power España SL, contesting the treatment of the merger of Enel Unión Fenosa Renovables SA (“EUFER”) into Enel Green Power España SL in 2011 as a tax neutral transaction, asserting that the transaction had no valid economic reason. On July 6, 2017, the company appealed the assessment at the first administrative level (Tribunal Económico-Administrativo Cen- tral - TEAC), defending the appropriateness of the tax treatment applied to the merger. The company has provided the supporting documentation demonstrating the synergies achieved as a result of the merger in order to prove the existence of a valid econo- mic reason for the transaction. On December 10, 2019, the TEAC denied the appeal and the company will continue to defend its actions in court (Audiencia Nacional), asking for the suspension of collection to be continued through the current bank guarantee. The total value of the suit at December 31, 2019 was about The total value of the suits at December 31, 2019 was about €93 million. €49 million. Tax litigation in Spain Income tax - Enel Iberia, Endesa and subsidiaries In 2018, the Spanish tax authorities completed a general audit involving the companies of the Group participating in the Spa- nish tax consolidation mechanism. This audit, which began in 2016, involved corporate income tax, value added tax and wi- thholding taxes (mainly for the years 2012 to 2014). With reference to the main claims, the companies involved have challenged the related assessments at the first admi- nistrative level (Tribunal Económico-Administrativo Central - TEAC), defending the correctness of their actions. With regard to the disputes concerning corporate income tax, 328 Consolidated Annual Report 201953. Future accounting standards The following provides a list of accounting standards, amend- tion period (i.e. until the determination of an official alter- ments and interpretations that will take effect for the Group native interest rate benchmark). The reform will impact fair after December 31, 2019: value measurement, the effects of hedge accounting and > “IFRS 17 - Insurance Contracts”, issued in May 2017. The net financial position when the alternative rates are establi- standard will take effect, subject to endorsement, for an- shed. nual periods beginning on or after January 1, 2021, with > “Amendments to IFRS 10 and IAS 28 - Sale or Contribution earlier application permitted. of Assets between an Investor and its Associate or Joint > “Amendments to References to the Conceptual Framework Venture”, issued in September 2014. The amendments cla- in IFRS Standards”, issued in March 2018. The document rify the accounting treatment for sales or contribution of sets out the amendments to affected standards in order to assets between an investor and its associates or joint ven- update references to the revised Conceptual Framework. tures. They confirm that the accounting treatment depends These amendments accompany the latest version of the on whether the assets sold or contributed to an associa- “Revised Conceptual Framework for Financial Reporting”, te or joint venture constitute a ‘business’ (as defined in issued in March 2018, which includes some new concepts, IFRS 3). The IASB has deferred the effective date of these provides updated definitions and recognition criteria and amendments indefinitely, but if the amendments are ap- clarifies some important concepts. The revised Conceptual plied early, they must be applied prospectively. Framework and the above amendments will take effect for > “Amendments to IAS 1 - Classification of Liabilities as Cur- annual reporting periods beginning on or after January 1, rent or Non-current”, issued in January 2020. The amend- 2020. ments regard the provisions of IAS 1 concerning the > “Amendments to IFRS 3 - Definition of a Business”, issued presentation of liabilities. More specifically, the changes in October 2018, is intended to assist companies in deter- clarify: mining whether a set of activities and assets is a business. - the criteria to adopt in classifying a liability as current The amendments will take effect, subject to endorsement, or non-current, specifying that the right of an entity to for annual periods beginning on or after January 1, 2020. defer settlement must exist at the end of the reporting > “Amendments to IAS 1 and IAS 8 - Definition of Material”, period; issued in October 2018, to align the definition of “mate- - the classification is unaffected by the intentions or rial” across accounting standards and clarify a number of expectations of management about when the entity aspects. The definition of material is as follows: “informa- will exercise its right to defer settlement of a liability; tion is material if omitting, misstating or obscuring it could - how the terms of a loan affect classification; and reasonably be expected to influence decisions that the pri- - that settlement regards the transfer to the counterparty mary users of general purpose financial statements make of cash, equity instruments, other assets or services. on the basis of those financial statements, which provide The amendments will take effect, subject to endorsement, financial information about a specific reporting entity.” The for annual periods beginning on or after January 1, 2022, amendments will take effect for annual periods beginning with earlier application permitted. on or after January 1, 2020. > “Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest Rate The Group is assessing the potential impact of the future ap- Benchmark Reform”, issued in September 2019, which plication of the new provisions. amend provisions concerning hedge accounting and cer- tain additional disclosure requirements during the transi- 329 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statements54. Events after the reporting period Fortaleza - Brazil Coronavirus pandemic (COVID-19) Petroleo Brasileiro SA - Petrobras, the gas supplier for the For- The novel coronavirus (COVID-19) epidemic began in Wuhan, taleza plant (Central Geradora Termelétrica Fortaleza or CGTF) China, and was first reported by national authorities to the in Brazil, has – as discussed in note 52 “Contingent assets World Health Organization on December 30, 2019. and liabilities” – notified its intention to terminate the contract In the early weeks of 2020, despite the considerable concern signed between those parties on the basis of an alleged finan- expressed by international organizations, the epidemic ap- cial imbalance in consideration of current market conditions. peared to be limited to certain areas of Southeast Asia and Accordingly, on January 27, 2020, Petrobras filed two different the Middle East, affecting only a number of regions in China, types of extraordinary appeal before the Supreme Court and South Korea and Iran. the Federal Court of Brasilia, respectively, to contest this de- In the second half of February, the first sporadic full-blown cas- cision. The proceedings are currently pending. es of COVID-19 in Italy started a second phase of the epidemic, Endesa arbitration award with a rapid escalation of its spread throughout Europe. Recently, the World Health Organization confirmed that the health emergency linked to COVID-19 has risen to the level of Following numerous unsuccessful negotiations, on December a pandemic and, just over two months after its initial report- 4, 2019, the most representative union within Endesa decided ing, the number of cases identified outside China has now to voluntarily participate in an arbitration proceeding before the exceeded those reported within the country in which the epi- Servicio Interconfederal de Mediación y Arbitraje (SIMA) with demic first occurred. This is due to the growing spread of the the aim of resolving the main differences relating to 5th Endesa virus in Europe, where Italy and Spain have the largest num- Collective Bargaining Agreement. As a prerequisite to the arbi- ber of infections to date, the rapid rise in the United States, as tration proceeding, in December 2019, Endesa’s largest union well as the emergence of the first outbreaks in Latin America agreed to waive its appeal pending before the Supreme Court and Africa. against the judgment of the court of first instance of March 26, 2019, which was favorable to Endesa, finding that the compa- To contain the effects of the disease, pending medical trials to ny’s interpretation of the appropriateness of the elimination of develop a vaccine that can be administered to humans, gov- certain social benefits for retired staff as a consequence of the ernments have adopted numerous containment measures, termination of 4th Endesa Collective Bargaining Agreement essentially aimed at restricting the free movement of people, was legitimate. The other trade unions involved have refused which may be maintained, or made more stringent, based on to join the arbitration proceeding, electing to go ahead with the the future spread of the virus. proceedings before the Supreme Court. The Group has issued guidelines aimed at ensuring compli- On January 21, 2020, the arbitration award was issued, with ance with the measures introduced at the local level and tak- the amendment of the corresponding parts of the 5th Ende- en numerous steps to adopt the most suitable procedures to sa Collective Bargaining Agreement, which was subsequent- prevent and/or mitigate the effects of contagion in the work- ly signed by the social partners. It entered force on January place. 23, 2020. On the same date, Endesa also signed two further In particular, business continuity is being managed thanks collective bargaining agreements (a “framework guarantee above all to: contract” and an “agreement on voluntary measures to sus- > the use of smart working for all employees whose jobs can pend or terminate employment contracts”) with all the unions be done remotely in the countries where the Group has present in the company. its largest presences, an approach introduced some years At present, it is not possible to quantify the financial impact ago that, thanks to investments in digitalization, allows our that the changes adopted will have on 2020, which are cur- people to work remotely at the same level of efficiency and rently being evaluated by the company. The parties involved effectiveness; are working together in the transition process to determine > the use of digitalized infrastructures that ensure the normal and formalize the financial aspects of the accord. operation of our generation assets, the continuity of elec- 330 Consolidated Annual Report 2019tricity service and the remote management of all activities measures taken at the local level to contain the spread of relating to the market and our relationship with customers. the disease; An Enel Global Task Force is also operational at the country > analyzing possible delays in supplies and tenders, at the level, which is charged with coordinating and directing the single Business Line supply chain level, that could be actions to be undertaken in the countries where the Group caused by the restrictions imposed on economic activity operates, in synergy with the global technological Business in some countries. Lines. In compliance with ESMA’s recommendations of March 11, On the basis of the current information available, in a con- 2020, the Group has conducted internal analyzes to assess stantly evolving scenario, we are constantly monitoring the real and potential impacts of COVID-19 on business ac- changes in macroeconomic and business variables in order tivities, on the financial situation and on performance, which to obtain the best estimate of the potential impacts on the essentially concern the following dimensions: Group in real time and enable their mitigation with response > forecasting the macroeconomic impacts on the main areas and contingency plans. of interest and in the main countries in which the Group Thanks to the Group’s geographical diversification, its integrat- operates; ed business model all along the value chain, a sound financial > forecasting electricity and gas prices in energy and other structure, as well as the level of digitalization achieved, which commodity markets; enables us guarantee the continuity of our operating activities > forecasting of the impacts on electricity demand in the with the same level of service, there is no evidence that COV- countries in which the Group operates of the various ID-19 will have a significant impact on the Group. 331 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsNotes to the financial statementsDeclaration of the Chief Executive Officer and the officer responsible for the preparation of the consolidated financial report 332 Consolidated Annual Report 2019Declaration of the Chief Executive Officer and the officer responsible for the preparation of the consolidated financial report of the Enel Group at December 31, 2019, pursuant to the provisions of Article 154-bis, paragraph 5, of Legislative Decree 58 of February 24, 1998 and Article 81-ter of CONSOB Regulation no. 11971 of May 14, 1999 1. The undersigned Francesco Starace and Alberto De Paoli, in their respective capacities as Chief Executive Officer and offi- cer responsible for the preparation of the financial reports of Enel SpA, hereby certify, taking account of the provisions of Article 154-bis, paragraphs 3 and 4, of Legislative Decree 58 of February 24, 1998: a. the appropriateness with respect to the characteristics of the Enel Group and b. the effective adoption of the administrative and accounting procedures for the preparation of the consolidated financial statements of the Enel Group in the period between January 1, 2019 and December 31, 2019. 2. In this regard, we report that: a. the appropriateness of the administrative and accounting procedures used in the preparation of the consolidated fi- nancial statements of the Enel Group has been verified in an assessment of the internal control system for financial reporting. The assessment was carried out on the basis of the guidelines set out in the “Internal Controls - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO); b. the assessment of the internal control system for financial reporting did not identify any material issues. 3. In addition, we certify that the consolidated financial statements of the Enel Group at December 31, 2019: a. have been prepared in compliance with the international accounting standards recognized in the European Union pur- suant to Regulation 2002/1606/EC of the European Parliament and of the Council of July 19, 2002; b. correspond to the information in the books and other accounting records; c. provide a true and fair representation of the performance and financial position of the issuer and the companies included in the scope of consolidation. 4. Finally, we certify that the Report on Operations, accompanied by the consolidated financial statements of the Enel Group at December 31, 2019, contains a reliable analysis of operations and performance, as well as the situation of the issuer and the companies included in the scope of consolidation, together with a description of the main risks and uncertainties to which they are exposed. Rome, March 19, 2020 Francesco Starace Alberto De Paoli Chief Executive Officer of Enel SpA Officer responsible for the preparation of the financial reports of Enel SpA Declaration of the Chief Executive Officer and the officer responsible 333 Enel GroupGovernanceStrategy & Risk ManagementPerformance & MetricsOutlookConsolidated financial statementsReports Report of the Board of Statutory Auditors to the Shareholders’ Meeting of Enel SpA 334 Consolidated Annual Report 2019REPORT OF THE BOARD OF STATUTORY AUDITORS TO THE SHAREHOLDERS’ MEETING OF ENEL SpA CALLED TO APPROVE THE FINANCIAL STATEMENTS FOR 2019 (pursuant to Article 153 of Legislative Decree 58/1998 ) Shareholders, During the year ended December 31, 2019 we performed the oversight activities envisaged by law at Enel SpA (hereinafter also “Enel” or the “Company”). In particular, pursuant to the provisions of Article 149, paragraph 1, of Legislative Decree 58 of February 24, 1998 (hereinafter the “Consolidated Law on Financial Intermediation”) and Article 19, paragraph 1 of Legislative Decree 39 of January 27, 2010, as amended by Legislative Decree 135 of July 17, 2016 (hereinafter “Decree 39/2010”), we monitored: - compliance with the law and the corporate bylaws as well as compliance with the principles of sound administration in the performance of the Company’s business; - - - - - - the Company’s financial reporting process and the adequacy of the administrative and accounting system, as well as the reliability of the latter in representing operational events; the statutory audit of the annual statutory and consolidated accounts and the selection process and independence of the Audit Firm; the adequacy and effectiveness of the internal control and risk management system; the adequacy of the organizational structure of the Company, within the scope of our responsibilities; the implementation of the corporate governance rules as provided for by the 2018 edition of the Corporate Governance Code for Listed Companies (hereinafter, the “Corporate Governance Code”), which the Company has adopted; the appropriateness of the instructions given by the Company to its subsidiaries to enable Enel to meet statutory public disclosure requirements. In performing our checks and assessments of the above issues, we did not find any particular issues to report. In compliance with the instructions issued by CONSOB with Communication no. DEM/1025564 of April 6, 2001, as amended, we report the following: • we monitored compliance with the law and the bylaws and we have no issues to report; Reports 335 • on a quarterly basis, we received adequate information from the Chief Executive Officer, as well as through our participation in the meetings of the Board of Directors of Enel, on activities performed, general developments in operations and the outlook, and on transactions with the most significant impact on performance or the financial position carried out by the Company and its subsidiaries. We report that the actions approved and implemented were in compliance with the law and the bylaws and were not manifestly imprudent, risky, in potential conflict of interest or in contrast with the resolutions of the Shareholders’ Meeting or otherwise prejudicial to the integrity of the Company’s assets. For a discussion of the features of the most significant transactions, please see the report on operations accompanying the separate financial statements of the Company and the consolidated financial statements of the Enel Group for 2019 (in the section “Significant events in 2019”); • we did not find any atypical or unusual transactions conducted with third parties, Group companies or other related parties; • in the section “Related parties” of the notes to the separate 2019 financial statements of the Company, the directors describe the main transactions with related-parties – the latter being identified on the basis of international accounting standards and the instructions of CONSOB – carried out by the Company, to which readers may refer for details on the transactions and their financial impact. They also detail the procedures adopted to ensure that related- party transactions are carried out in accordance with the principles of transparency and procedural and substantive fairness. The transactions were carried out in compliance with the approval and execution processes set out in the related procedure – adopted in compliance with the provisions of Article 2391- bis of the Italian Civil Code and the implementing regulations issued by CONSOB – described in the report on corporate governance and ownership structure for 2019. All transactions with related parties reported in the notes to the separate 2019 financial statements of the Company were executed as part of ordinary operations in the interest of the Company and settled on market terms and conditions; • the Company declares that it has prepared its separate financial statements for 2019 on the basis of international accounting standards (IAS/IFRS) – and the interpretations issued by the IFRIC and the SIC – endorsed by the European Union pursuant to Regulation (EC) no. 1606/2002 and in force at the close of 2019, as well as the provisions of Legislative Decree 38 of February 28, 2005 and its related implementing measures, as it did the previous year. The Company’s 2 336 Consolidated Annual Report 2019 • on a quarterly basis, we received adequate information from the Chief Executive separate financial statements for 2019 have been prepared on a going-concern Officer, as well as through our participation in the meetings of the Board of basis using the cost method, with the exception of items that are measured at fair Directors of Enel, on activities performed, general developments in operations value under the IFRS-EU, as indicated in the accounting policies for the individual and the outlook, and on transactions with the most significant impact on items of the financial statements. The notes to the separate financial statements performance or the financial position carried out by the Company and its give detailed information on the accounting standards and measurement criteria subsidiaries. We report that the actions approved and implemented were in adopted. With regard to recently issued accounting standards, the notes to the compliance with the law and the bylaws and were not manifestly imprudent, separate financial statements report (i) standards applied for the first time in risky, in potential conflict of interest or in contrast with the resolutions of the 2019, which as indicated in the notes did not have a significant impact in the year Shareholders’ Meeting or otherwise prejudicial to the integrity of the Company’s under review, and (ii) standards that will apply in the future. The separate assets. For a discussion of the features of the most significant transactions, financial statements for 2019 of the Company underwent the statutory audit by please see the report on operations accompanying the separate financial the Audit Firm, EY SpA, which issued an unqualified opinion, including with regard statements of the Company and the consolidated financial statements of the Enel to the consistency of the report on operations and certain information in the Group for 2019 (in the section “Significant events in 2019”); report on corporate governance and ownership structure of the Company with the • we did not find any atypical or unusual transactions conducted with third parties, financial statements, as well as the compliance of the report on operations with Group companies or other related parties; the provisions of law, pursuant to Article 14 of Decree 39/2010 and Article 10 of • in the section “Related parties” of the notes to the separate 2019 financial Regulation (EU) no. 537/2014. The report of EY SpA also includes: statements of the Company, the directors describe the main transactions with related-parties – the latter being identified on the basis of international accounting standards and the instructions of CONSOB – carried out by the - - a discussion of key aspects of the audit report on the separate financial statements; and the declaration provided pursuant to Article 14, paragraph 2(e) of Decree Company, to which readers may refer for details on the transactions and their 39/2010 stating that the audit firm did not identify any significant errors in financial impact. They also detail the procedures adopted to ensure that related- the contents of the report on operations; party transactions are carried out in accordance with the principles of • the Company declares that it has also prepared the consolidated financial transparency and procedural and substantive fairness. The transactions were statements of the Enel Group for 2019 on the basis of international accounting carried out in compliance with the approval and execution processes set out in standards (IAS/IFRS) – and the interpretations issued by the IFRIC and the SIC – the related procedure – adopted in compliance with the provisions of Article 2391- endorsed by the European Union pursuant to Regulation (EC) no. 1606/2002 and bis of the Italian Civil Code and the implementing regulations issued by CONSOB in force at the close of 2019, as well as the provisions of Legislative Decree 38 of – described in the report on corporate governance and ownership structure for February 28, 2005 and its related implementing measures, as it did the previous 2019. All transactions with related parties reported in the notes to the separate year. The 2019 consolidated financial statements of the Enel Group are also 2019 financial statements of the Company were executed as part of ordinary prepared on a going-concern basis using the cost method, with the exception of operations in the interest of the Company and settled on market terms and items that are measured at fair value under the IFRS-EU (as indicated in the conditions; discussion of measurement criteria for the individual items) and non-current • the Company declares that it has prepared its separate financial statements for assets (or disposal groups) classified as held for sale, which are measured at the 2019 on the basis of international accounting standards (IAS/IFRS) – and the lower of carrying amount and fair value less costs to sell. The notes to the interpretations issued by the IFRIC and the SIC – endorsed by the European consolidated financial statements provide a detailed discussion of the accounting Union pursuant to Regulation (EC) no. 1606/2002 and in force at the close of standards and measurement criteria adopted. As regards recently issued 2019, as well as the provisions of Legislative Decree 38 of February 28, 2005 and accounting standards, the notes to the consolidated financial statements discuss its related implementing measures, as it did the previous year. The Company’s (i) standards applied for the first time in 2019, in particular IFRS 16 Leases, with 2 Reports 3 337 a specific discussion of the associated impacts on the balance sheet and income statement, and (ii) standards that will apply in the future. The consolidated financial statements for 2019 of the Enel Group underwent statutory audit by the Audit Firm EY SpA, which issued an unqualified opinion, including with regard to the consistency of the consistency of the report on operations and certain information in the report on corporate governance and ownership structure with the consolidated financial statements, as well as the compliance of the report on operations with the provisions of law, pursuant to Article 14 of Decree 39/2010 and Article 10 of Regulation (EU) no. 537/2014. The report of EY SpA also includes: - - a discussion of key aspects of the audit report on the consolidated financial statements; and the declaration provided pursuant to Article 14, paragraph 2(e) of Decree 39/2010 and Article 4 of CONSOB Regulation no. 20267 (implementing Legislative Decree 254 of December 30, 2016) concerning, respectively, a statement that the Audit Firm did not identify any significant errors in the contents of the report on operations and that it verified that the Board of Directors had approved the consolidated non-financial statement. Under the terms of its engagement, EY SpA also issued unqualified opinions on the financial statements for 2019 of the most significant Italian companies of the Enel Group. Moreover, during periodic meetings with the representatives of the Audit Firm, EY SpA, the latter did not raise any issues concerning the reporting packages of the main foreign companies of the Enel Group, selected by the auditors on the basis of the work plan established for the auditing of the consolidated financial statements of the Enel Group, that would have a sufficiently material impact to be reported in the opinion on those financial statements; • taking due account of the recommendations of the European Securities and Markets Authority issued on January 21, 2013, and most recently confirmed with the Public Statement of October 27, 2015, to ensure greater transparency concerning the methods used by listed companies in testing goodwill for impairment, in line with the recommendations contained in the joint Bank of Italy – CONSOB – ISVAP document no. 4 of March 3, 2010, and in the light of indications of CONSOB in its Communication no. 7780 of January 28, 2016, the compliance of the impairment testing procedure with the provisions of IAS 36 was expressly approved by the Board of Directors of the Company, having obtained a favorable opinion in this regard from the Control and Risk Committee in February 2020, i.e. prior to the date of approval of the financial statements for 2019; 4 338 Consolidated Annual Report 2019 includes: - - statements; and a specific discussion of the associated impacts on the balance sheet and income • we examined the Board of Directors’ proposal for the allocation of net income for statement, and (ii) standards that will apply in the future. The consolidated 2019 and have no comments in this regard; financial statements for 2019 of the Enel Group underwent statutory audit by the • we note that the Board of Directors of the Company certified, following Audit Firm EY SpA, which issued an unqualified opinion, including with regard to appropriate checks by the Control and Risk Committee and the Board of Statutory the consistency of the consistency of the report on operations and certain Auditors in March 2020, that as at the date on which the 2019 financial information in the report on corporate governance and ownership structure with statements were approved, the Enel Group continued to meet the conditions the consolidated financial statements, as well as the compliance of the report on established by CONSOB (set out in Article 15 of the Market Rules, approved with operations with the provisions of law, pursuant to Article 14 of Decree 39/2010 Resolution no. 20249 of December 28, 2017) concerning the accounting and Article 10 of Regulation (EU) no. 537/2014. The report of EY SpA also transparency and adequacy of the organizational structures and internal control a discussion of key aspects of the audit report on the consolidated financial countries must comply with so that Enel shares can continue to be listed on systems that subsidiaries established and regulated under the law of non-EU regulated markets in Italy; the declaration provided pursuant to Article 14, paragraph 2(e) of Decree • we monitored, within the scope of our responsibilities, the adequacy of the 39/2010 and Article 4 of CONSOB Regulation no. 20267 (implementing organizational structure of the Company (and the Enel Group as a whole), Legislative Decree 254 of December 30, 2016) concerning, respectively, a obtaining information from department heads and in meetings with the boards of statement that the Audit Firm did not identify any significant errors in the auditors or equivalent bodies of a number of the main Enel Group companies in contents of the report on operations and that it verified that the Board of Italy and abroad, for the purpose of the reciprocal exchange of material Directors had approved the consolidated non-financial statement. information. As from the second half of 2014, the organizational structure of the Under the terms of its engagement, EY SpA also issued unqualified opinions on Enel Group is based on a matrix of Global Business Lines and geographical areas. the financial statements for 2019 of the most significant Italian companies of the Taking account of the changes implemented most recently in 2019, it is organized Enel Group. Moreover, during periodic meetings with the representatives of the into: (i) Global Business Lines, which are responsible for managing and Audit Firm, EY SpA, the latter did not raise any issues concerning the reporting developing assets, optimizing their performance and the return on capital packages of the main foreign companies of the Enel Group, selected by the employed in the various geographical areas in which the Group operates. The auditors on the basis of the work plan established for the auditing of the Global Business Lines are: Global Infrastructure and Networks, Global Power consolidated financial statements of the Enel Group, that would have a sufficiently Generation, Global Trading and Enel-X; (ii) Regions and Countries, which are material impact to be reported in the opinion on those financial statements; responsible for managing relationships with local institutional bodies, regulatory • taking due account of the recommendations of the European Securities and authorities, the media and other local stakeholders, as well as the development of Markets Authority issued on January 21, 2013, and most recently confirmed with the customer base with regard to the sale of electricity and gas, in each of the the Public Statement of October 27, 2015, to ensure greater transparency countries in which the Group is present, while also providing staff and other concerning the methods used by listed companies in testing goodwill for service support to the Global Business Lines and adopting appropriate security, impairment, in line with the recommendations contained in the joint Bank of Italy safety and environmental standards. Regions and Countries comprise: Italy, – CONSOB – ISVAP document no. 4 of March 3, 2010, and in the light of Iberia, Europe and Euro-Mediterranean Affairs, Latin America, North America, and indications of CONSOB in its Communication no. 7780 of January 28, 2016, the Africa, Asia and Oceania; (iii) Global Service Functions, which are responsible for compliance of the impairment testing procedure with the provisions of IAS 36 was managing information and communication technology activities (Global Digital expressly approved by the Board of Directors of the Company, having obtained a Solutions) and procurement at the Group level (Global Procurement); and (iv) favorable opinion in this regard from the Control and Risk Committee in February Holding Company Functions, which among other things are responsible for 2020, i.e. prior to the date of approval of the financial statements for 2019; managing governance processes at the Group level. They include: Administration, 4 Reports 5 339 Finance and Control, Human Resources and Organization, Communications, Legal and Corporate Affairs, Audit and Innovation. The Board of Statutory Auditors feels that the organizational system described above is adequate to support the strategic development of the Company and the Enel Group and is also consistent with control requirements; • during meetings with the boards of auditors or equivalent bodies of a number of the Group’s main companies in Italy and abroad, no material issues emerged that would require reporting here; • we monitored the independence of the Audit Firm EY SpA, having received from them specific written confirmation today that they met that requirement (pursuant to the provisions of Article 6, paragraph 2(a), of Regulation (EU) 537/2014) and having discussed the substance of that declaration with the audit partner. In this regard, we also monitored – as provided for under Article 19, paragraph 1(e), of Decree 39/2010 – the nature and the scale of non-audit services provided to the Company and other Enel Group companies by EY SpA and the entities belonging to its network, the fees for which are reported in the notes to the separate financial statements of the Company. Following our examinations, the Board of Statutory Auditors feels that there are no critical issues concerning the independence of the Audit Firm EY SpA. We held periodic meetings with the representatives of the Audit Firm, pursuant to Article 150, paragraph 3, of the Consolidated Law on Financial Intermediation, and no material issues emerged that would require mention in this report. As regards the provisions of Article 11 of Regulation (EU) 537/2014, EY SpA today provided the Board of Statutory Auditors with the “additional report” for 2019 on the results of the statutory audit carried out, which indicates no significant difficulties encountered during the audit or any significant shortcomings in the internal control system for financial reporting or the Enel accounting system. The Board of Statutory Auditors will transmit that report to the Board of Directors promptly, accompanied by any comments it may have, in accordance with Article 19, paragraph 1(a), of Decree 39/2010. The Audit Firm also reported that it did not prepare any management letter for 2019; • with regard to the activities performed by the Board of Statutory Auditors in 2019 concerning the specific selection process for the engagement to perform the statutory audit of the accounts of Enel SpA for the 2020-2028 period, please see (i) the report referred to in Article 153 of the Consolidated Law on Financial Intermediation, approved by the Board of Statutory Auditors on April 17, 2019, 6 340 Consolidated Annual Report 2019 Finance and Control, Human Resources and Organization, Communications, Legal submitted to the Ordinary Shareholders’ Meeting of May 16, 2019, and (ii) the and Corporate Affairs, Audit and Innovation. The Board of Statutory Auditors feels explanatory report on the sixth item of the agenda of that Shareholders’ Meeting; that the organizational system described above is adequate to support the • we monitored the financial reporting process, the appropriateness of the strategic development of the Company and the Enel Group and is also consistent administrative and accounting system and its reliability in representing with control requirements; operational events, as well as compliance with the principles of sound • during meetings with the boards of auditors or equivalent bodies of a number of administration in the performance of the Company’s business and we have no the Group’s main companies in Italy and abroad, no material issues emerged that comments in that regard. We conducted our checks by obtaining information from would require reporting here; the head of the Administration, Finance and Control department (taking due • we monitored the independence of the Audit Firm EY SpA, having received from account of the head’s role as the officer responsible for the preparation of the them specific written confirmation today that they met that requirement Company’s financial reports), examining Company documentation and analyzing (pursuant to the provisions of Article 6, paragraph 2(a), of Regulation (EU) the findings of the examination performed by EY SpA. The Chief Executive Officer 537/2014) and having discussed the substance of that declaration with the audit and the officer responsible for the preparation of the financial reports of Enel partner. In this regard, we also monitored – as provided for under Article 19, issued a statement (regarding the Company’s 2019 separate financial paragraph 1(e), of Decree 39/2010 – the nature and the scale of non-audit statements) certifying (i) the appropriateness with respect to the characteristics services provided to the Company and other Enel Group companies by EY SpA of the Company and the effective adoption of the administrative and accounting and the entities belonging to its network, the fees for which are reported in the procedures used in the preparation of the financial statements; (ii) the notes to the separate financial statements of the Company. Following our compliance of the content of the financial reports with international accounting examinations, the Board of Statutory Auditors feels that there are no critical standards endorsed by the European Union pursuant to Regulation (EC) no. issues concerning the independence of the Audit Firm EY SpA. We held periodic 1606/2002; (iii) the correspondence of the financial statements with the meetings with the representatives of the Audit Firm, pursuant to Article 150, information in the books and other accounting records and their ability to provide paragraph 3, of the Consolidated Law on Financial Intermediation, and no a true and fair representation of the performance and financial position of the material issues emerged that would require mention in this report. Company; and (iv) that the report on operations accompanying the financial As regards the provisions of Article 11 of Regulation (EU) 537/2014, EY SpA today statements contains a reliable analysis of operations and performance, as well as provided the Board of Statutory Auditors with the “additional report” for 2019 on the situation of the issuer, together with a description of the main risks and the results of the statutory audit carried out, which indicates no significant uncertainties to which it is exposed. The statement also affirmed that the difficulties encountered during the audit or any significant shortcomings in the appropriateness of the administrative and accounting procedures used in the internal control system for financial reporting or the Enel accounting system. The preparation of the separate financial statements of the Company had been Board of Statutory Auditors will transmit that report to the Board of Directors verified in an assessment of the internal control system for financial reporting promptly, accompanied by any comments it may have, in accordance with Article (supported by the findings of the independent testing performed by a qualified 19, paragraph 1(a), of Decree 39/2010. external advisor and the Company’s Audit department, with each focusing on The Audit Firm also reported that it did not prepare any management letter for their respective areas of responsibility on the basis of the different nature of the 2019; various checks) and that the assessment of the internal control system did not • with regard to the activities performed by the Board of Statutory Auditors in 2019 identify any material issues. An analogous statement was prepared for the concerning the specific selection process for the engagement to perform the consolidated financial statements for 2019 of the Enel Group; statutory audit of the accounts of Enel SpA for the 2020-2028 period, please see • we monitored the adequacy and effectiveness of the internal control system, (i) the report referred to in Article 153 of the Consolidated Law on Financial primarily through constant participation of the head of the Audit department of Intermediation, approved by the Board of Statutory Auditors on April 17, 2019, the Company in the meetings of the Board of Statutory Auditors and holding most 6 Reports 7 341 of the meetings jointly with the Control and Risk Committee, as well as through periodic meetings with the body charged with overseeing the operation of and compliance with the organizational and management model adopted by the Company pursuant to Legislative Decree 231/2001. In the light of our examination and in the absence of significant issues, the internal control and risk management system can be considered adequate and effective. In February 2020, the Board of Directors of the Company expressed an analogous assessment of the situation and also noted, in November 2019, that the main risks associated with the strategic targets set out in the 2020-2024 Business Plan were compatible with the management of the Company in a manner consistent with those targets; • in 2019 we received one complaint concerning events deemed censurable pursuant to Article 2408 of the Italian Civil Code from a shareholder on the occasion of the Shareholders’ Meeting of May 16, 2019. More specifically, the complaint regarded the allegedly arbitrary manner with which the Chairman of the Meeting determined the amount of time available to shareholders to request the floor and make their comments, in violation of the Rules of the Shareholders’ meeting. The Board of Statutory Auditors, having conducted appropriate enquiries with the support of the Legal and Corporate Affairs department, found no irregularities to report and notified the shareholder involved of our findings. No petitions were received by the Board of Statutory Auditors during 2019; • we monitored the effective implementation of the Corporate Governance Code, which the Company has adopted, verifying the compliance of Enel’s governance arrangements with the recommendations of the Code. Detailed information on the Company’s corporate governance system can be found in the report on corporate governance and ownership structure for 2019. In March 2019 and February 2020, the Board of Statutory Auditors verified that the Board of Directors, in evaluating the independence of non-executive directors, correctly applied the assessment criteria specified in the Corporate Governance Code and the principle of the priority of substance over form set out in that Code, adopting a transparent procedure, the details of which are discussed in the report on corporate governance and ownership structure for 2019. With regard to the so-called “self-assessment” of the independence of its members, the Board of Statutory Auditors – in May 2019 and in February 2020 – ascertained that all standing statutory auditors met the relevant requirements set out in the Consolidated Law on Financial Intermediation and in the Corporate Governance Code. 342 8 Consolidated Annual Report 2019 of the meetings jointly with the Control and Risk Committee, as well as through In the final part of 2019 and during the first two months of 2020, the Board of periodic meetings with the body charged with overseeing the operation of and Statutory Auditors, with the support of an independent advisory firm, conducted a compliance with the organizational and management model adopted by the board review assessing the size, composition and functioning of the Board of Company pursuant to Legislative Decree 231/2001. In the light of our Statutory Auditors, as was done for 2018, similar to the review conducted for the examination and in the absence of significant issues, the internal control and risk Board of Directors since 2004. This is a best practice that the Board of Statutory management system can be considered adequate and effective. In February Auditors intended to adopt even in the absence of a specific recommendation of 2020, the Board of Directors of the Company expressed an analogous assessment the Corporate Governance Code, a “peer-to-peer review” approach, i.e. the of the situation and also noted, in November 2019, that the main risks associated assessment not only of the functioning of the body as a whole, but also of the with the strategic targets set out in the 2020-2024 Business Plan were compatible style and content of the contribution provided by each of the auditors. The with the management of the Company in a manner consistent with those targets; findings of the board review for 2019 offer a positive picture of the functioning of • in 2019 we received one complaint concerning events deemed censurable Enel’s Board of Statutory Auditors, from which it emerges that this body – despite pursuant to Article 2408 of the Italian Civil Code from a shareholder on the having significantly changed its composition following the appointment of a new occasion of the Shareholders’ Meeting of May 16, 2019. More specifically, the Board by the Ordinary Shareholders’ Meeting of May 16, 2019 – has adopted complaint regarded the allegedly arbitrary manner with which the Chairman of effective and efficient operating methods that comply with the reference the Meeting determined the amount of time available to shareholders to request regulatory framework, as attested by the advisory firm charged with supporting the floor and make their comments, in violation of the Rules of the Shareholders’ the evaluation process; meeting. The Board of Statutory Auditors, having conducted appropriate enquiries During 2019, the Board of Statutory Auditors also participated in an induction with the support of the Legal and Corporate Affairs department, found no program, structured into 4 meetings, organized by the Company to provide irregularities to report and notified the shareholder involved of our findings. No directors and statutory auditors with an adequate understanding of the business petitions were received by the Board of Statutory Auditors during 2019; sectors in which the Enel Group operates, as well as the company dynamics and • we monitored the effective implementation of the Corporate Governance Code, their evolution, market trends and the applicable regulatory framework. For an which the Company has adopted, verifying the compliance of Enel’s governance analysis of the issues addressed at the various induction sessions, please see the arrangements with the recommendations of the Code. Detailed information on the report on corporate governance and ownership structure for 2019; Company’s corporate governance system can be found in the report on corporate • we monitored the application of the provisions of Legislative Decree 254 of governance and ownership structure for 2019. In March 2019 and February 2020, December 30, 2016 (hereinafter “Decree 254) concerning the disclosure of non- the Board of Statutory Auditors verified that the Board of Directors, in evaluating financial and diversity information by certain large undertakings and groups. In the independence of non-executive directors, correctly applied the assessment performing that activity, we monitored the adequacy of the organizational, criteria specified in the Corporate Governance Code and the principle of the administrative, reporting and control system established by the Company in order priority of substance over form set out in that Code, adopting a transparent to enable the accurate representation in the consolidated non-financial statement procedure, the details of which are discussed in the report on corporate for 2019 of the activity of the Enel Group, its results and its impacts in the non- governance and ownership structure for 2019. financial areas referred to in Article 3, paragraph 1, of Decree 254, and have no With regard to the so-called “self-assessment” of the independence of its comments in this regard. The Audit Firm, EY SpA, issued, pursuant to Article 3, members, the Board of Statutory Auditors – in May 2019 and in February 2020 – paragraph 10, of Decree 254 and Article 5 of CONSOB Regulation no. 20267 of ascertained that all standing statutory auditors met the relevant requirements set January 18, 2018, its certification of the conformity of the information provided in out in the Consolidated Law on Financial Intermediation and in the Corporate the consolidated non-financial statement with the requirements of applicable law; Governance Code. • since the listing of its shares, the Company has adopted specific rules (most recently amended in September 2018) for the internal management and 8 Reports 9 343 processing of confidential information, which also set out the procedures for the disclosure of documentation and information concerning the Company and the Group, with specific regard to inside information. Those rules (which can be consulted on the corporate website) contain appropriate provisions directed at subsidiaries to enable Enel to comply with statutory public disclosure requirements, pursuant to Article 114, paragraph 2, of the Consolidated Law on Financial Intermediation; • in 2002 the Company also adopted (and has subsequently updated, most recently in December 2019) a Code of Ethics (also available on the corporate website) that expresses the commitments and ethical responsibilities involved in the conduct of business, regulating and harmonizing corporate conduct in accordance with standards of maximum transparency and fairness with respect to all stakeholders; • with regard to the provisions of Legislative Decree 231 of June 8, 2001 – which introduced into Italian law a system of administrative (in fact criminal) liability for companies for certain types of offences committed by its directors, managers or employees on behalf of or to the benefit of the company – since July 2002 Enel has adopted a compliance program consisting of a “general part” and various “special parts” concerning the difference offences specified by Legislative Decree 231/2001 that the program is intended to prevent. For a description of the manner in which the model has been adapted to the characteristics of the various Italian companies of the Group, as well as a description of the purposes of the “Enel Global Compliance Program” for the Group’s foreign companies, please see the report on corporate governance and ownership structure for 2019. The structure that monitors the operation and compliance with the program and is responsible for updating it is a collegial body. Since December 2017 it has been composed of three external members with specific professional expertise on corporate organization matters and corporate criminal law. The Board of Statutory Auditors received adequate information on the main activities carried out in 2019 by that structure, including in meetings with its members. Our examination of those activities found no facts or situations that would require mention in this report; • in 2019, the Board of Statutory Auditors issued a favorable opinion (at the meeting of February 5, 2019), concerning the 2019 Audit Plan in accordance with the provisions of Article 7.C.1, letter c) of the Corporate Governance Code, preliminary to the resolutions pertaining to the Board of Directors in that regard; • a report on the fixed and variable compensation accrued by those who served as Chairman of the Board of Directors, the Chief Executive Officer/General Manager 10 344 Consolidated Annual Report 2019 processing of confidential information, which also set out the procedures for the and other directors in 2019 for their respective positions and any compensation disclosure of documentation and information concerning the Company and the instruments awarded to them is contained in the Report on Remuneration Policy Group, with specific regard to inside information. Those rules (which can be for 2020 and Remuneration Paid in 2019 referred to in Article 123-ter of the consulted on the corporate website) contain appropriate provisions directed at Consolidated Law on Financial Intermediation, approved by the Board of subsidiaries to enable Enel to comply with statutory public disclosure Directors, acting on a proposal of the Nomination and Compensation Committee requirements, pursuant to Article 114, paragraph 2, of the Consolidated Law on on April 2, 2020, which will be published in compliance with the time limits Financial Intermediation; established by law. The design of these compensation instruments is in line with • in 2002 the Company also adopted (and has subsequently updated, most recently best practices, complying with the principle of establishing a link with appropriate in December 2019) a Code of Ethics (also available on the corporate website) that financial and non-financial performance targets and pursuing the creation of expresses the commitments and ethical responsibilities involved in the conduct of shareholder value over the medium and long term. The proposals to the Board of business, regulating and harmonizing corporate conduct in accordance with Directors concerning such forms of compensation and the determination of the standards of maximum transparency and fairness with respect to all stakeholders; associated parameters were prepared by the Nomination and Compensation • with regard to the provisions of Legislative Decree 231 of June 8, 2001 – which Committee, which is made up entirely of independent directors, drawing on the introduced into Italian law a system of administrative (in fact criminal) liability for findings of benchmark analyses, including at the international level, conducted by companies for certain types of offences committed by its directors, managers or an independent consulting firm. In addition, the Report on Remuneration Policy employees on behalf of or to the benefit of the company – since July 2002 Enel for 2020 and Remuneration Paid in 2019 referred to in Article 123-ter of the has adopted a compliance program consisting of a “general part” and various Consolidated Law on Financial Intermediation contains, in compliance with the “special parts” concerning the difference offences specified by Legislative Decree applicable CONSOB regulations, specific disclosures on the remuneration earned 231/2001 that the program is intended to prevent. For a description of the in 2019 by key management personnel (in aggregate form for the latter) and by manner in which the model has been adapted to the characteristics of the various the members of the oversight body. Italian companies of the Group, as well as a description of the purposes of the The Board of Statutory Auditors also supervised the process of preparing the “Enel Global Compliance Program” for the Group’s foreign companies, please see remuneration policy for 2020, without finding any critical issues. In particular, the report on corporate governance and ownership structure for 2019. The oversight activity examined the consistency of the various measures envisaged by structure that monitors the operation and compliance with the program and is that policy with the provisions of Directive (EU) 2017/828 (the transposition of responsible for updating it is a collegial body. Since December 2017 it has been which into Italian law had not yet been completed at the date of this Report), with composed of three external members with specific professional expertise on the recommendations of the Corporate Governance Code, as well as with the corporate organization matters and corporate criminal law. The Board of Statutory results of the benchmark analysis carried out, including at the international level, Auditors received adequate information on the main activities carried out in 2019 by an independent consulting firm that the Nomination and Compensation by that structure, including in meetings with its members. Our examination of Committee elected to engage. those activities found no facts or situations that would require mention in this report; The Board of Statutory Auditors’ oversight activity in 2019 was carried out in 17 • in 2019, the Board of Statutory Auditors issued a favorable opinion (at the meetings (12 of which held jointly with the Control and Risk Committee) and with meeting of February 5, 2019), concerning the 2019 Audit Plan in accordance with participation in the 14 meetings of the Board of Directors, and, through the chairman the provisions of Article 7.C.1, letter c) of the Corporate Governance Code, or one or more of its members, in the 8 meetings of the Nomination and preliminary to the resolutions pertaining to the Board of Directors in that regard; Compensation Committee, in the only meeting of the Related Parties Committee and • a report on the fixed and variable compensation accrued by those who served as in the 8 meetings of the Corporate Governance and Sustainability Committee. The Chairman of the Board of Directors, the Chief Executive Officer/General Manager 10 Reports 11 345 delegated magistrate of the State Audit Court participated in the meetings of the Board of Statutory Auditors and those of the Board of Directors. During the course of this activity and on the basis of information obtained from EY SpA, no omissions, censurable facts, irregularities or other significant developments were found that would require reporting to the regulatory authorities or mention in this report. Finally, the Board of Statutory Auditors notes, as at the date of this Report, the major global health emergency associated with the COVID-19 epidemic. Italian authorities have introduced significant limitations on freedom of movement within the country to contain the contagion, among other things imposing bans on gatherings. In this context, the Board of Statutory Auditors, in compliance with the above measures to contain the COVID-19 epidemic, has held its meetings – beginning with the meeting of February 26, 2020 – exclusively with the use of audio/video conference systems by all participants, nevertheless ensuring their identification and the exchange of documentation, in accordance with the provisions of Article 25.4 of the Bylaws. The Board of Statutory Auditors also notes that, as permitted under Article 106, paragraph 4, of Decree Law 18 of March 17, 2020, the Company's Board of Directors has called the ordinary Shareholders’ Meeting for May 14, 2020 in a single call, establishing that it will be conducted in a manner that enables shareholders to participate exclusively through the shareholders’ representative designated by the Company, to whom shareholders may also confer proxies or sub-proxies pursuant to Article 135-novies of the Consolidated Law on Financial Intermediation, also in derogation from the provisions of Article 135-undecies, paragraph 4, of the same Consolidated Law. The Board of Statutory Auditors will ensure that the rights of the Shareholders can be exercised on the occasion of the aforementioned Shareholders' Meeting, within the limits permitted by the special procedures envisaged for holding the Meeting. In the coming months, the Board of Statutory Auditors will carry out its oversight activity, in close coordination with the Board of Directors, to evaluate the impact of the COVID-19 epidemic on the performance and financial situation of the Company and the Enel Group. Based on the oversight activity performed and the information exchanged with the independent auditors EY SpA, we recommend that you approve the Company’s financial statements for the year ended December 31, 2019 in conformity with the proposals of the Board of Directors. 12 346 Consolidated Annual Report 2019 Il Collegio Sindacale svolgerà nei prossimi mesi la propria attività di vigilanza in stretto coordinamento con il Consiglio di Amministrazione, per verificare gli impatti economici e finanziari per la Società e il Gruppo Enel determinati dall’epidemia da COVID-19. Il Collegio Sindacale svolgerà nei prossimi mesi la propria attività di vigilanza in stretto Il Collegio Sindacale, a seguito dell’attività di vigilanza svolta e in base a quanto emerso coordinamento con il Consiglio di Amministrazione, per verificare gli impatti economici e finanziari per la Società e il Gruppo Enel determinati dall’epidemia da COVID-19. nello scambio di dati e informazioni con la Società di revisione EY S.p.A., Vi propone di approvare il Bilancio della Società al 31 dicembre 2019 in conformità a quanto proposto Il Collegio Sindacale svolgerà nei prossimi mesi la propria attività di vigilanza in stretto Il Collegio Sindacale, a seguito dell’attività di vigilanza svolta e in base a quanto emerso coordinamento con il Consiglio di Amministrazione, per verificare gli impatti economici dal Consiglio di Amministrazione. nello scambio di dati e informazioni con la Società di revisione EY S.p.A., Vi propone di e finanziari per la Società e il Gruppo Enel determinati dall’epidemia da COVID-19. approvare il Bilancio della Società al 31 dicembre 2019 in conformità a quanto proposto Il Collegio Sindacale, a seguito dell’attività di vigilanza svolta e in base a quanto emerso dal Consiglio di Amministrazione. Roma, 8 aprile 2020 nello scambio di dati e informazioni con la Società di revisione EY S.p.A., Vi propone di Il Collegio Sindacale delegated magistrate of the State Audit Court participated in the meetings of the Rome, April 8, 2020 The Board of Statutory Auditors approvare il Bilancio della Società al 31 dicembre 2019 in conformità a quanto proposto dal Consiglio di Amministrazione. Roma, 8 aprile 2020 Il Collegio Sindacale Roma, 8 aprile 2020 Il Collegio Sindacale _____________ Dott.ssa Barbara Tadolini Presidente _____________ ____________________ Dott.ssa Barbara Tadolini Presidente Barbara Tadolini - Chairman _____________ Dott.ssa Barbara Tadolini Presidente ____________________ ____________________ ____________________ Avv. Romina Guglielmetti – Sindaco Romina Guglielmetti - Auditor Avv. Romina Guglielmetti – Sindaco ____________________ Avv. Romina Guglielmetti – Sindaco ____________________ Claudio Sottoriva - Auditor ____________________ ____________________ ____________________ Prof. Claudio Sottoriva – Sindaco Prof. Claudio Sottoriva – Sindaco Prof. Claudio Sottoriva – Sindaco 13 13 13 12 Reports 13 347 Board of Statutory Auditors and those of the Board of Directors. During the course of this activity and on the basis of information obtained from EY SpA, no omissions, censurable facts, irregularities or other significant developments were found that would require reporting to the regulatory authorities or mention in this report. Finally, the Board of Statutory Auditors notes, as at the date of this Report, the major global health emergency associated with the COVID-19 epidemic. Italian authorities have introduced significant limitations on freedom of movement within the country to contain the contagion, among other things imposing bans on gatherings. In this context, the Board of Statutory Auditors, in compliance with the above measures to contain the COVID-19 epidemic, has held its meetings – beginning with the meeting of February 26, 2020 – exclusively with the use of audio/video conference systems by all participants, nevertheless ensuring their identification and the exchange of documentation, in accordance with the provisions of Article 25.4 of the Bylaws. The Board of Statutory Auditors also notes that, as permitted under Article 106, paragraph 4, of Decree Law 18 of March 17, 2020, the Company's Board of Directors has called the ordinary Shareholders’ Meeting for May 14, 2020 in a single call, establishing that it will be conducted in a manner that enables shareholders to participate exclusively through the shareholders’ representative designated by the Company, to whom shareholders may also confer proxies or sub-proxies pursuant to Article 135-novies of the Consolidated Law on Financial Intermediation, also in derogation from the provisions of Article 135-undecies, paragraph 4, of the same Consolidated Law. The Board of Statutory Auditors will ensure that the rights of the Shareholders can be exercised on the occasion of the aforementioned Shareholders' Meeting, within the limits permitted by the special procedures envisaged for holding the Meeting. In the coming months, the Board of Statutory Auditors will carry out its oversight activity, in close coordination with the Board of Directors, to evaluate the impact of the COVID-19 epidemic on the performance and financial situation of the Company and the Enel Group. Based on the oversight activity performed and the information exchanged with the independent auditors EY SpA, we recommend that you approve the Company’s financial statements for the year ended December 31, 2019 in conformity with the proposals of the Board of Directors. REPORT OF THE BOARD OF STATUTORY AUDITORS TO THE SHAREHOLDERS’ MEETING OF ENEL SPA CALLED TO APPROVE THE FINANCIAL STATEMENTS FOR 2019 (pursuant to Article 153 of Legislative Decree 58/1998 ) ***** ADDENDUM OF APRIL 30, 2020 ***** Dear Shareholders, With regard to the content of the Report indicated above (in the text approved by the Board of Statutory Auditors on April 8, 2020) concerning the Board’s supervision of the process of preparing the remuneration policy for 2020 (the “Remuneration Policy”), we inform you that we attended the meeting of the Nomination and Compensation Committee of Enel SpA held on April 28 and 29, 2020 and at the subsequent meeting of the Board of Directors held on April 29, 2020 in which certain elements of the policy were reviewed. More specifically, at the meeting of April 29, 2020 the Board of Directors, acting on a proposal of the Nomination and Compensation Committee, decided to modify a number of aspects of the Remuneration Policy, enhancing, in particular, certain sustainability objectives to which the short-term variable component of the remuneration of the Chief Executive Officer/General Manager of Enel SpA and the long-term variable component of the remuneration of the top management of the Enel Group are linked. The Board also verified that these amendments, which involved documents already published in view of the Ordinary Shareholders’ Meeting convened on May 14, 2020 in a single call, were disclosed to investors by means of a press release published promptly by the Company. Rome, April 30, 2020 The Board of Statutory Auditors ____________________ Barbara Tadolini - Chair 348 Consolidated Annual Report 2019 REPORT OF THE BOARD OF STATUTORY AUDITORS TO THE SHAREHOLDERS’ MEETING OF ENEL SPA CALLED TO APPROVE THE FINANCIAL STATEMENTS FOR 2019 (pursuant to Article 153 of Legislative Decree 58/1998 ) ADDENDUM OF APRIL 30, 2020 ***** ***** Dear Shareholders, With regard to the content of the Report indicated above (in the text approved by the Board of Statutory Auditors on April 8, 2020) concerning the Board’s supervision of the process of preparing the remuneration policy for 2020 (the “Remuneration Policy”), we inform you that we attended the meeting of the Nomination and Compensation Committee of Enel SpA held on April 28 and 29, 2020 and at the subsequent meeting of the Board of Directors held on April 29, 2020 in which certain Il Collegio Sindacale svolgerà nei prossimi mesi la propria attività di vigilanza in stretto elements of the policy were reviewed. coordinamento con il Consiglio di Amministrazione, per verificare gli impatti economici More specifically, at the meeting of April 29, 2020 the Board of Directors, acting on a e finanziari per la Società e il Gruppo Enel determinati dall’epidemia da COVID-19. proposal of the Nomination and Compensation Committee, decided to modify a Il Collegio Sindacale svolgerà nei prossimi mesi la propria attività di vigilanza in stretto number of aspects of the Remuneration Policy, enhancing, in particular, certain Il Collegio Sindacale, a seguito dell’attività di vigilanza svolta e in base a quanto emerso coordinamento con il Consiglio di Amministrazione, per verificare gli impatti economici sustainability objectives to which the short-term variable component of the nello scambio di dati e informazioni con la Società di revisione EY S.p.A., Vi propone di e finanziari per la Società e il Gruppo Enel determinati dall’epidemia da COVID-19. remuneration of the Chief Executive Officer/General Manager of Enel SpA and the approvare il Bilancio della Società al 31 dicembre 2019 in conformità a quanto proposto Il Collegio Sindacale svolgerà nei prossimi mesi la propria attività di vigilanza in stretto Il Collegio Sindacale, a seguito dell’attività di vigilanza svolta e in base a quanto emerso coordinamento con il Consiglio di Amministrazione, per verificare gli impatti economici dal Consiglio di Amministrazione. long-term variable component of the remuneration of the top management of the nello scambio di dati e informazioni con la Società di revisione EY S.p.A., Vi propone di e finanziari per la Società e il Gruppo Enel determinati dall’epidemia da COVID-19. Enel Group are linked. approvare il Bilancio della Società al 31 dicembre 2019 in conformità a quanto proposto Il Collegio Sindacale, a seguito dell’attività di vigilanza svolta e in base a quanto emerso The Board also verified that these amendments, which involved documents already dal Consiglio di Amministrazione. Roma, 8 aprile 2020 nello scambio di dati e informazioni con la Società di revisione EY S.p.A., Vi propone di Il Collegio Sindacale published in view of the Ordinary Shareholders’ Meeting convened on May 14, 2020 approvare il Bilancio della Società al 31 dicembre 2019 in conformità a quanto proposto in a single call, were disclosed to investors by means of a press release published dal Consiglio di Amministrazione. Il Collegio Sindacale Roma, 8 aprile 2020 promptly by the Company. Roma, 8 aprile 2020 Il Collegio Sindacale Rome, April 30, 2020 Rome, April 8, 2020 The Board of Statutory Auditors The Board of Statutory Auditors _____________ Dott.ssa Barbara Tadolini Presidente ____________________ _____________ ____________________ Dott.ssa Barbara Tadolini Presidente Barbara Tadolini - Chair Barbara Tadolini - Chairman _____________ Dott.ssa Barbara Tadolini Presidente ____________________ ____________________ ____________________ Avv. Romina Guglielmetti – Sindaco Romina Guglielmetti - Auditor Avv. Romina Guglielmetti – Sindaco ____________________ Avv. Romina Guglielmetti – Sindaco ____________________ Claudio Sottoriva - Auditor ____________________ ____________________ ____________________ Prof. Claudio Sottoriva – Sindaco Prof. Claudio Sottoriva – Sindaco Prof. Claudio Sottoriva – Sindaco 13 13 13 Reports 13 349 Report of the Audit Firm on the 2019 consolidated financial statements of the Enel Group Enel S.p.A. Consolidat ed financial st at ement s as at December 31, 2019 Independent audit or’s report pursuant t o art icle 14 of Legislat ive Decree n. 39, dat ed 27 J anuary 2010, and art icle 10 of EU Regulat ion n. 537/ 2014 350 EY S.p.A. Via Lombardia, 31 00187 Roma Tel: +39 06 324751 Fax: +39 06 324755504 ey.com Independent auditor’s repor t pursuant t o art icle 14 of Legislat ive Decree n. 39, dat ed 27 J anuary 2010 and ar t icle 10 of EU Regulat ion n. 537/ 2014 (Translat ion from t he original It alian t ext ) To the Shareholders of Enel S.p.A. Opinion 38/ 2005. Basis for Opinion Report on t he Audit of t he Consolidat ed Financial Stat ement s We have audited the consolidated financial statements of Enel Group (the Group), which comprise the balance sheet as at December 31, 2019, the income statement, the statement of comprehensive income, the statement of changes in shareholders’ equity the statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the consolidated financial statements give a t rue and fair view of the financial position of the Group as at December 31, 2019, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and with the regulations issued for implementing art. 9 of Legislative Decree n. We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Enel S.p.A. in accordance with the regulations and standards on ethics and independence applicable to audits of financial statements under Italian Laws. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Mat t ers Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. EY S.p.A. Sede Legale: Via Lombar dia, 31 - 00187 Roma Capit ale Sociale Euro 2.525.000,00 i.v. Iscrit t a alla S.O. del Regist ro delle Impr ese presso la C.C.I.A.A. di Roma Codice fiscale e numer o di iscr izione 00434000584 - numer o R.E.A. 250904 P.IVA 00891231003 Iscrit ta all’Albo Speciale delle societ à di r evisione Consob al pr ogressivo n. 2 deliber a n.10831 del 16/ 7/ 1997 A member firm of Er nst & Young Global Limit ed Iscrit ta al Regist ro Revisori Legali al n. 70945 Pubblicat o sulla G.U. Suppl. 13 - IV Ser ie Speciale del 17/ 2/ 1998 Consolidated Annual Report 2019EY S.p.A. Via Lombardia, 31 00187 Roma Tel: +39 06 324751 Fax: +39 06 324755504 ey.com EY S.p.A. Via Lombardia, 31 00187 Roma Tel: +39 06 324751 Fax: +39 06 324755504 ey.com Independent auditor’s repor t pursuant t o art icle 14 of Legislat ive Decree n. 39, dat ed 27 J anuary 2010 and ar t icle 10 of EU Regulat ion n. 537/ 2014 (Translat ion from t he original It alian t ext ) Independent auditor’s repor t pursuant t o art icle 14 of Legislat ive Decree n. 39, dat ed 27 J anuary 2010 and ar t icle 10 of EU Regulat ion To the Shareholders of n. 537/ 2014 Enel S.p.A. (Translat ion from t he original It alian t ext ) Report on t he Audit of t he Consolidat ed Financial Stat ement s To the Shareholders of Enel S.p.A. Opinion We have audited the consolidated financial statements of Enel Group (the Group), which comprise the Report on t he Audit of t he Consolidat ed Financial Stat ement s balance sheet as at December 31, 2019, the income statement, the statement of comprehensive income, the statement of changes in shareholders’ equity the statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant Opinion accounting policies. We have audited the consolidated financial statements of Enel Group (the Group), which comprise the balance sheet as at December 31, 2019, the income statement, the statement of comprehensive In our opinion, the consolidated financial statements give a t rue and fair view of the financial position income, the statement of changes in shareholders’ equity the statement of cash flows for the year of the Group as at December 31, 2019, and of its financial performance and its cash flows for the then ended, and notes to the consolidated financial statements, including a summary of significant year then ended in accordance with International Financial Reporting Standards as adopted by the accounting policies. European Union and with the regulations issued for implementing art. 9 of Legislative Decree n. 38/ 2005. Basis for Opinion Basis for Opinion In our opinion, the consolidated financial statements give a t rue and fair view of the financial position of the Group as at December 31, 2019, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our European Union and with the regulations issued for implementing art. 9 of Legislative Decree n. responsibilities under those standards are further described in the Auditor’s Responsibilities for the 38/ 2005. Audit of the Consolidated Financial Statements section of our report. We are independent of the Enel S.p.A. in accordance with the regulations and standards on ethics and independence applicable to audits of financial statements under Italian Laws. We believe that the audit evidence we have obtained We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our is sufficient and appropriate to provide a basis for our opinion. responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Enel S.p.A. in accordance with the regulations and standards on ethics and independence applicable to audits of financial statements under Italian Laws. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Mat t ers Key Audit Mat t ers Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. EY S.p.A. Sede Legale: Via Lombar dia, 31 - 00187 Roma Capit ale Sociale Euro 2.525.000,00 i.v. Iscrit ta alla S.O. del Regist ro delle Impr ese presso la C.C.I.A.A. di Roma Codice fiscale e numer o di iscr izione 00434000584 - numer o R.E.A. 250904 P.IVA 00891231003 Iscrit ta al Regist ro Revisori Legali al n. 70945 Pubblicat o sulla G.U. Suppl. 13 - IV Ser ie Speciale del 17/ 2/ 1998 Iscrit ta all’Albo Speciale delle societ à di r evisione Consob al pr ogressivo n. 2 deliber a n.10831 del 16/ 7/ 1997 A member firm of Er nst & Young Global Limit ed EY S.p.A. Sede Legale: Via Lombar dia, 31 - 00187 Roma Capit ale Sociale Euro 2.525.000,00 i.v. Iscrit ta alla S.O. del Regist ro delle Impr ese presso la C.C.I.A.A. di Roma Codice fiscale e numer o di iscr izione 00434000584 - numer o R.E.A. 250904 P.IVA 00891231003 Iscrit ta al Regist ro Revisori Legali al n. 70945 Pubblicat o sulla G.U. Suppl. 13 - IV Ser ie Speciale del 17/ 2/ 1998 Iscrit ta all’Albo Speciale delle societ à di r evisione Consob al pr ogressivo n. 2 deliber a n.10831 del 16/ 7/ 1997 Reports A member firm of Er nst & Young Global Limit ed 351 We identified the following key audit matters: Key Audit Matt er Audit Response Our audit procedures in response to this Key Audit Matter included, among others: · Assessment of the impairment process of non-current assets and related controls implemented by the Group; · Assessment of the criteria adopted to identify the CGUs and the reconciliation of their carrying amounts to the consolidated financial statements; · Assessment of the key assumptions underlying the Industrial Plan 2020-2024 and relevant future cash flows, including the comparison with industry data and forecasts; · Assessment of the consistency of the cash flow projections for each CGU with the Indust rial Plan 2020-2024; · Assessment of IAS 36 accounting requirements for the reversal of previously recognized impairment losses; · Assessment of the management’s ability to make accurate projections, through the comparison of the actual results wit h the previous forecasts. In performing our procedures, we engaged our valuation experts in order to verify the methodologies used in the process, the mathematical accuracy of the model, the reasonableness of the long-term growth rates and the discount rates as well as the results of the sensitivit y analysis performed by the management. Lastly, we reviewed the adequacy of the disclosures provided in the notes to the financial statements relating this Key Audit Matter. Recoverabilit y of non-current asset s The consolidated financial statements include, within the non-current assets balance, Property, Plant and Equipment for Euro 79.809 million, Intangible Assets for Euro 19.089 million and Goodwill for Euro 14.241 million. The Directors tested for impairment the carrying values of the Cash Generating Units (CGUs) as of the balance sheet date, which include goodwill, intangible assets with indefinite useful lives and other non-current assets where indication of impairment were noted. The process adopted by management and the methodologies for assessing and determining the recoverable amount of each CGU are sometimes based on complex assumptions which, due to their nature, require the Directors to exercise their judgment. Such a judgment relates, primarily, to the cash flow projections deriving from the Indust rial Plan 2020-2024 as well as from the determination of the long-term growth rates and the discount rates applied to these projections. In 2019, the Group reported impairment losses of Euro 4,221 million mainly related to write- down of carrying values of certain coal-fired plants in Italy, Spain, Chile and Russia. In relation to the above, the key assumptions made by the Directors relate to future economic trends, including future trends of the electricity and gas demand and the related expected prices, the availabilit y of renewable resources as well as certain assumptions such as inflation, exchange and interest rates. Because of the judgment required and the complexit y of assumptions used to estimate the recoverable amount of the non-current assets, we identified this area as a Key Audit Matter. The disclosures related to the impairment of non-current assets are included in Note 2. 2 352 Consolidated Annual Report 2019“ Accounting policies and measurement criteria - Recoverability of non-financial assets” , Note 16. “ Property, Plant and Equipment” and Note 21. “ Goodwill” . Key Audit Matt er Audit Response Revenues from unbilled sale of elect ricit y and gas Revenues from sales of electricity and gas to retail customers are recognized upon delivery and include, in addition to amounts invoiced based on periodic meter readings or on the volumes notified by distributors and transporters, an estimate of the electricity and gas delivered during the year but not yet invoiced. Revenues accrued between the date of the last meter reading and year-end are based on estimates of the daily consumption of customers, primarily determined on their historical information, adjusted to reflect the climate factors or other matters that may affect the estimated consumption. Because of the complexity of assumptions used to estimate the revenues from unbilled sale of elect ricity and gas, we identified this area as a Key Audit Matter. The disclosures related to the revenues from unbilled sale of electricity and gas are included in Note 2. “ Accounting policies and measurement criteria – Use of estimates – Revenue Recognition” . Our audit procedures in response to this Key Audit Matter included, among others: · assessment of the process related to the recognition of revenues from sales of elect ricity and gas and related key controls, including Information Technology controls, implemented by the entities within the Group; · assessment of the algorit hms and data in the ERP systems of such Group entities, also with the support of our Information Technology specialists; · testing of a sample of data used by management to determine the accrued revenues, including, whenever applicable, the comparison of quantities entered into the network as made available by transporters and dist ributors; · look-back analysis of prior estimates against actual data subsequently reported. Lastly, we reviewed the adequacy of the disclosures provided in the notes to the financial statements relating this Key Audit Matter. 3 Reports 353 Key Audit Matt er Legal proceedings Audit Response The Group is involved in several civil, administ rative and tax disputes arising from the normal course of business, for which final outcomes cannot be easily predicted and could potentially results in significant liabilities. The assessment of the risks associated with the litigations is based on complex assumptions, which, by their nature, require the use of the Directors’ judgment. Such judgment relates, primarily, to the assessment of the uncertainties connected to the prediction of the outcome of the proceedings and to the adequacy of the disclosures in the financial statements; it is also based on the assessment made by internal and external legal counsels. Because of the judgment required, the materiality of such litigations and the complexit y of the assessment process, we identified this area as a Key Audit Matter. The disclosures related to legal proceedings are included in Note 2. “ Accounting policies and measurement criteria – Use of estimates – Litigation” and Note 52. “ Contingent liabilities and asset s” . Our audit procedures in response to this Key Audit Matter included, among others: · assessment of the process and relevant controls implemented to identify legal and tax litigations, and pending administ rative proceedings; · assessment of the assumptions used in the valuation of potential legal and tax risks performed by the legal and tax departments within the Group; · inquiry with the legal and tax departments regarding the status of the most significant disputes and inspection of the key relevant documentation, also with the support of our tax and legal experts; · analysis of the external confirmations received from the external legal and tax counsels assisting the Group entities involved in such disputes, and assessment of the consistency of the information obtained with the risk assessment performed by management and the legal and tax departments. Lastly, we reviewed the adequacy of the disclosures provided in the notes to the financial statements relating this Key Audit Matter. 4 354 Consolidated Annual Report 2019Responsibilit ies of Direct ors and Those Charged wit h Governance for t he Consolidat ed Financial St atement s The Directors are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and with the regulations issued for implementing art. 9 of Legislative Decree n. 38/ 2005, and, wit hin the terms provided by the law, for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Directors are responsible for assessing the Group’s ability to continue as a going concern and, when preparing the consolidated financial statements, for the appropriateness of the going concern assumption, and for appropriate disclosure thereof. The Directors prepare the consolidated financial statements on a going concern basis unless they either intend to liquidate the Parent Company Enel S.p.A. or to cease operations, or have no realistic alternative but to do so. The statutory audit committee (“ Collegio Sindacale” ) is responsible, within the terms provided by the law, for overseeing the Group’s financial reporting process. Audit or’s Responsibilit ies for t he Audit of t he Consolidat ed Financial St atement s Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (ISA Italia) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with International Standards on Auditing (ISA Italia), we have exercised professional judgment and maintained professional skepticism throughout the audit. In addition: · we have identified and assessed the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, designed and performed audit procedures responsive to those risks, and obtained audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; · we have obtained an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control; · we have evaluated the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors; · we have concluded on the appropriateness of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to consider this matter in forming our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future 5 Reports 355 events or conditions may cause the Group to cease to continue as a going concern; · we have evaluated the overall presentation, st ructure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. · we have obtained sufficient appropriate audit evidence regarding the financial information of the entities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We have communicated with those charged wit h governance, identified at an appropriate level as required by ISA Italia, regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We have provided those charged with governance with a statement that we have complied wit h the ethical and independence requirements applicable in Italy, and we have communicated with them all matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged wit h governance, we have determined those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We have described these matters in our auditor’s report. Addit ional informat ion pursuant t o art icle 10 of EU Regulat ion n. 537/ 14 The shareholders of Enel S.p.A., in the general meeting held on April 29, 2011, engaged us to perform the audits of the consolidated financial statements for each of the years ending December 31, 2011 to December 31, 2019. We declare that we have not provided prohibited non-audit services, referred to article 5, par. 1, of EU Regulation n. 537/ 2014, and that we have remained independent of the Group in conducting the audit. We confirm that the opinion on the consolidated financial statements included in this report is consistent with the content of the additional report to the audit committee (Collegio Sindacale) in their capacity as audit committee, prepared pursuant to article 11 of the EU Regulation n. 537/ 2014. 356 6 Consolidated Annual Report 2019events or conditions may cause the Group to cease to continue as a going concern; · we have evaluated the overall presentation, st ructure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. · we have obtained sufficient appropriate audit evidence regarding the financial information of the entities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We have communicated with those charged wit h governance, identified at an appropriate level as required by ISA Italia, regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. safeguards. We have provided those charged with governance with a statement that we have complied wit h the ethical and independence requirements applicable in Italy, and we have communicated with them all matters that may reasonably be thought to bear on our independence, and where applicable, related From the matters communicated with those charged wit h governance, we have determined those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We have described these matters in our auditor’s report. Addit ional informat ion pursuant to art icle 10 of EU Regulat ion n. 537/ 14 The shareholders of Enel S.p.A., in the general meeting held on April 29, 2011, engaged us to perform the audits of the consolidated financial statements for each of the years ending December 31, 2011 to December 31, 2019. We declare that we have not provided prohibited non-audit services, referred to article 5, par. 1, of EU Regulation n. 537/ 2014, and that we have remained independent of the Group in conducting the audit. We confirm that the opinion on the consolidated financial statements included in this report is consistent with the content of the additional report to the audit committee (Collegio Sindacale) in their capacity as audit committee, prepared pursuant to article 11 of the EU Regulation n. 537/ 2014. Report on compliance wit h ot her legal and regulat ory requirement s Opinion pursuant to art icle 14, paragraph 2, subparagraph e), of Legislat ive Decree n. 39 dated 27 J anuary 2010 and of art icle 123-bis, paragraph 4, of Legislat ive Decree n. 58, dat ed 24 February 1998 The Directors of Enel S.p.A. are responsible for the preparation of the Report on Operations and of the Report on Corporate Governance and Ownership Structure of Group Enel as at December 31, 2019, including their consistency wit h the related consolidated financial statements and their compliance with the applicable laws and regulations. We have performed the procedures required under audit standard SA Italia n. 720B, in order to express an opinion on the consistency of the Report on Operations and of specific information included in the Report on Corporate Governance and Ownership Structure as provided for by article 123-bis, paragraph 4, of Legislative Decree n. 58, dated 24 February 1998, with the consolidated financial statements of Enel Group as at December 31, 2019 and on their compliance wit h the applicable laws and regulations, and in order to assess whether they contain material misstatements. In our opinion, the Report on Operations and the above mentioned specific information included in the Report on Corporate Governance and Ownership Structure are consistent wit h the consolidated financial statements of Enel Group as at December 31, 2019 and comply with the applicable laws and regulations. With reference to the statement required by art. 14, paragraph 2, subparagraph e), of Legislative Decree n. 39, dated 27 January 2010, based on our knowledge and understanding of the entity and its environment obtained through our audit, we have no matters to report. St at ement pursuant t o art icle 4 of Consob Regulat ion implement ing Legislat ive Decree n. 254, dat ed 30 December 2016 The Directors of Enel S.p.A. are responsible for the preparation of the non-financial information pursuant to Legislative Decree n. 254, dated 30 December 2016. We have verified that non-financial information has been approved by Directors. Pursuant to art icle 3, paragraph 10, of Legislative Decree n. 254, dated 30 December 2016, such non-financial information are subject to a separate compliance report signed by us. Rome, April 8, 2020 EY S.p.A. Signed by: Massimo Antonelli, Auditor This report has been translated into the English language solely for the convenience of international readers. 6 7 Reports 357 Attachments Subsidiaries, associates and other significant equity investments of the Enel Group at December 31, 2019 In compliance with CONSOB Notice no. DEM/6064293 of July The following information is included for each company: name, 28, 2006 and Article 126 of CONSOB Resolution no. 11971 of registered office, share capital, currency in which share capital May 14, 1999, a list of subsidiaries and associates of Enel SpA is denominated, activity, method of consolidation, Group com- at December 31, 2019, pursuant to Article 2359 of the Italian panies that have a stake in the company and their respective Civil Code, and of other significant equity investments is provi- ownership share, and the Group’s ownership share. ded below. Enel has full title to all investments. 358 Consolidated Annual Report 2019Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Parent Company Enel SpA Rome Italy 10,166,679,946.00 EUR Holding Holding Subsidiaries (Cataldo) Hydro Power Associates Albany USA 4814 Investments LLC Andover USA - - USD USD Abc Solar 10 SpA Santiago Chile 1,000,000.00 CLP Abc Solar 2 SpA Santiago Chile 1,000,000.00 CLP Electricity generation from renewable resources Equity Hydro Development Group Acquisition LLC Pyrites Hydro LLC 50.00% 50.00% 50.00% Electricity generation from renewable resources Plant construction and electricity generation from renewable resources Plant construction and electricity generation from renewable resources Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Green Power Chile Ltda 100.00% 61.93% Line-by-line Enel Green Power Chile Ltda 100.00% 61.93% Aced Renewables Hidden Valley (RF) (Pty) Ltd Activation Energy Limited Adams Solar PV Project Two (RF) (Pty) Ltd Gauteng Republic of South Africa 1,000.00 ZAR Electricity generation and sale from renewable resources Line-by-line Dublin Ireland 100,000.00 EUR Renewable energy Line-by-line Gauteng Republic of South Africa 10,000,000.00 ZAR Enel Green Power RSA 2 (RF) (Pty) Ltd EnerNOC Ireland Limited Enel Green Power RSA (Pty) Ltd 60.00% 60.00% 100.00% 100.00% 60.00% 60.00% Adria Link Srl Gorizia Aero-tanna Srl Rome Italy Italy 300,297.00 EUR Equity Enel Produzione SpA 50.00% 50.00% 15,000.00 EUR Renewable energy Line-by-line Enel Green Power SpA 100.00% 100.00% Agassiz Beach LLC Minneapolis USA - USD Rome Italy 10,000.00 EUR Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% Line-by-line Enel Green Power Solar Energy Srl 80.00% 80.00% Line-by-line Electricity generation from renewable resources Design, construction and operation of merchant lines Barcelona Spain 793,340.00 EUR Design and services - Aguilón 20 SA Zaragoza Spain 2,682,000.00 EUR Alba Energia Ltda Niterói Brazil 16,045,169.00 BRL Albany Solar LLC Wilmington USA - USD Electricity generation from renewable resources Line-by-line Development, design, construction and operation of plants Line-by-line Electricity generation from renewable resources Line-by-line Edistribución Redes Digitales SL (Sociedad Unipersonal) Enel Green Power España SL Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Aurora Distributed Solar LLC 14.29% 10.01% 51.00% 35.75% 100.00% 0.00% 100.00% 100.00% 51.00% Agatos Green Power Trino Srl Agrupación Acefhat AIE Alliance SA Managua Nicaragua 6,180,150.00 NIO - Equity Ufinet Latam SLU 49.90% 10.27% Almeyda Solar SpA Santiago Chile 1,736,965,000.00 CLP Almussafes Servicios Energéticos SL Alpe Adria Energia Srl Barcelona Spain 3,010.00 EUR Udine Italy 900,000.00 EUR Electricity generation from renewable resources Management and maintenance of power plants Electricity sale Design, construction and operation of merchant lines Line-by-line Enel Green Power Chile Ltda 100.00% 61.93% Line-by-line Enel Green Power España SL 100.00% 70.10% Line-by-line Enel Produzione SpA 50.00% 50.00% 359 AttachmentsAmpla Energia e Serviços SA Anea - Agenzia napoletana per l’energia e l’ambiente Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Alta Farms Wind Project II LLC Andover USA 1.00 USD Alvorada Energia SA Niterói Brazil 21,017,415.92 BRL Niterói Brazil 2,498,230,386.65 BRL Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale Line-by-line Tradewind Energy Inc. Enel Green Power Brasil Participações Ltda 100.00% 100.00% 100.00% 100.00% Electricity generation, transmission and distribution Line-by-line Enel Brasil SA 99.73% 57.11% Naples Italy 418,330.12 EUR - - e-distribuzione SpA 12.96% 12.96% Annandale Solar LLC Minnesota USA - USD Electricity generation from renewable resources Line-by-line Apiacás Energia SA Niterói Brazil 14,216,846.33 BRL Electricity sale Line-by-line Aquenergy Systems LLC Greenville USA Andover USA - 1.00 USD USD Electricity generation from renewable resources Electricity generation and sale from renewable resources Equity Aquilla Wind Project LLC Aragonesa de Actividades Energéticas SA Aranort Desarrollos SL Asociación Nuclear Ascó- Vandellós II AIE Athonet France SASU Athonet Srl Athonet UK Ltd Vandellos L’Hospitalet de l’Infant Paris Trieste Teruel Spain 60,100.00 EUR Electricity sale Line-by-line Madrid Spain 3,010.00 EUR Wind plants Line-by-line Spain 19,232,400.00 EUR Management and maintenance of power plants Proportional France 50,000.00 EUR ICT Italy 6,892,757.00 EUR - Battle, East Sussex United Kingdom 1.00 1.00 GBP Telecommunications USD Any legal activity - - - - Aurora Distributed Solar LLC Enel Green Power Brasil Participações Ltda EGPNA REP Hydro Holdings LLC 100.00% 51.00% 100.00% 100.00% 100.00% 50.00% Endesa Red SA (Sociedad Unipersonal) Enel Green Power España SL Endesa Generación SA 100.00% 70.10% 100.00% 70.10% 85.41% 59.87% Athonet Srl 100.00% 16.00% Enel X Srl 16.00% 16.00% Athonet Srl 100.00% 16.00% Athonet Srl 100.00% 16.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Athonet USA Inc. Wilmington USA Atwater Solar LLC Wilmington USA Aurora Distributed Solar LLC Wilmington USA Aurora Land Holdings LLC Aurora Solar Holdings LLC Aurora Wind Project LLC Wilmington USA Wilmington USA Andover USA Autumn Hills LLC Wilmington USA - - - - 1.00 - Avikiran Energy India Private Limited Gurugram India 100,000.00 Avikiran Solar India Private Limited New Delhi India 100,000.00 360 USD USD USD USD USD USD INR INR Line-by-line Aurora Distributed Solar LLC 100.00% 51.00% Line-by-line Aurora Solar Holdings LLC 51.00% 51.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel North America Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation and sale from renewable resources Electricity generation from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Chi Minnesota Wind LLC Enel Green Power India Private Limited (formerly BLP Energy Private Limited) Enel Green Power India Private Limited (formerly BLP Energy Private Limited) 51.00% 51.00% 100.00% 100.00% 100.00% 100.00% Consolidated Annual Report 2019 Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Avikiran Surya India Private Limited Gurugram India 100,000.00 INR Electricity generation and sale from renewable resources Line-by-line Avikiran Vayu India Private Limited Gurugram India 100,000.00 INR Electricity generation, distribution and sale Line-by-line Enel Green Power India Private Limited (formerly BLP Energy Private Limited) Enel Green Power India Private Limited (formerly BLP Energy Private Limited) 100.00% 100.00% 100.00% 100.00% Azure Sky Solar Project LLC Azure Sky Wind Project LLC Andover USA Andover USA 1.00 1.00 USD USD Baikal Enterprise SL Baleares Energy SL Palma de Mallorca Palma de Mallorca Spain 3,006.00 EUR Spain 4,509.00 EUR Barnet Hydro Company LLC Burlington USA Barnwell County Solar Project LLC Andover USA - - USD USD Baylio Solar SLU Seville Spain 3,000.00 EUR Beaver Falls Water Power Company Wilmington USA Beaver Valley Holdings LLC Beaver Valley Power Company LLC Wilmington USA Wilmington USA Belomechetskaya WPS Moscow Russian Federation - - - USD USD USD Rome Italy 100,000.00 EUR Albany USA - USD Gurugram India 10,000,000.00 BLP Vayu (Project 2) Private Limited Gurugram India 45,000,000.00 New Delhi India 5,000,000.00 Bioenergy Casei Gerola Srl Black River Hydro Assoc. BLP Vayu (Project 1) Private Limited BLP Wind Project (Amberi) Private Limited Blue Star Wind Project LLC Electricity generation and sale from renewable resources Electricity generation and sale from renewable resources Electricity generation and sale from renewable resources Electricity generation and sale from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Green Power España SL 100.00% 70.10% Line-by-line AFS Line-by-line Enel Green Power España SL Enel North America Inc. Sweetwater Hydroelectric LLC Tradewind Energy Inc. 100.00% 70.10% 10.00% 90.00% 100.00% 100.00% 100.00% Line-by-line Enel Green Power España SL 100.00% 70.10% Line-by-line Beaver Valley Holdings LLC 67.50% 67.50% Line-by-line Enel North America Inc. 100.00% 100.00% Equity Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Equity Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line INR INR INR EGPNA REP Hydro Holdings LLC Enel Green Power Rus Limited Liability Company Enel Green Power SpA (Cataldo) Hydro Power Associates Enel North America Inc. Enel Green Power India Private Limited (formerly BLP Energy Private Limited) Enel Green Power India Private Limited (formerly BLP Energy Private Limited) Enel Green Power India Private Limited (formerly BLP Energy Private Limited) 100.00% 50.00% 100.00% 100.00% 100.00% 100.00% 75.00% 25.00% 62.50% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Andover USA 1.00 USD Electricity generation and sale from renewable resources Line-by-line Tradewind Energy Inc. 100.00% 100.00% 361 3,010,000.00 RUB Renewables Line-by-line Attachments Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding BluRe MA Manternach Luxembourg 6,400,000.00 EUR Insurance - Bogaris PV1 SLU Sevilla Spain 3,000.00 EUR Wind plants Line-by-line Boiro Energía SA Boiro Spain 601,010.00 EUR Bondia Energia Ltda Niterói Brazil 2,950,888.00 BRL Boott Hydropower LLC Boston USA - USD Bosa del Ebro SL Zaragoza Spain 3,010.00 EUR Bp Hydro Associates Boise USA Salt Lake City USA - - Andover USA 1.00 Andover USA Andover USA - - Electricity generation from renewable resources Equity Plant development, design, construction and operation Line-by-line Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation and sale from renewable resources Electricity generation from renewable resources Electricity generation, transportation, sale and trading Equity Line-by-line Line-by-line Line-by-line Line-by-line USD USD USD USD USD Quito Ecuador 30,290.00 USD - Equity Topeka USA - USD Electricity generation from renewable resources Line-by-line Buffalo Jump LP Alberta Canada 10.00 CAD Holding Line-by-line Buffalo Spirit Wind Project LLC Andover USA 1.00 USD Bp Hydro Finance Partnership Bravo Dome Wind Project LLC Brazoria County Solar Project LLC Brazoria West Solar Project LLC Broadband Comunicaciones SA Buffalo Dunes Wind Project LLC Australia 1,000.00 AUD Australia 100.00 AUD Australia 100.00 AUD Australia 1,000.00 AUD Electricity generation and sale from renewable resources Electricity generation from renewable resources Renewables Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Equity Equity Equity Equity Australia - AUD Renewables Equity Australia 1,000.00 AUD Australia 100.00 AUD Electricity generation from renewable resources Electricity generation from renewable resources Equity Equity Bungala One Finco (Pty) Ltd Barangaroo, Sydney Bungala One Operation Holding Trust Bungala One Operations Holding (Pty) Ltd Barangaroo, Sydney Barangaroo, Sydney Bungala One Operations (Pty) Ltd Barangaroo, Sydney Bungala One Operations Trust Barangaroo, Sydney Bungala One Property (Pty) Ltd Barangaroo, Sydney Bungala One Property Holding (Pty) Ltd Barangaroo, Sydney 362 Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Slovenské elektrárne AS Enel Green Power España SL 5.00% 1.65% 100.00% 70.10% Enel Green Power España SL Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda EGPNA REP Hydro Holdings LLC Enel Green Power España SL Chi Idaho LLC Enel North America Inc. Bp Hydro Associates Enel North America Inc. 40.00% 28.04% 100.00% 0.00% 100.00% 100.00% 50.00% 51.00% 35.75% 68.00% 32.00% 75.92% 24.08% 100.00% 100.00% Tradewind Energy Inc. Ufinet Ecuador Ufiec SA Ufinet Latam SLU EGPNA Development Holdings LLC Enel Alberta Wind Inc. Enel Green Power Canada Inc. Tradewind Energy Inc. Bungala One Property (Pty) Ltd Enel Green Power Bungala (Pty) Ltd Enel Green Power Bungala (Pty) Ltd Bungala One Operations Holding (Pty) Ltd Bungala One Operations Holding (Pty) Ltd Bungala One Property Holding (Pty) Ltd Enel Green Power Bungala (Pty) Ltd 100.00% 100.00% 99.99% 0.01% 20.60% 75.00% 75.00% 0.10% 99.90% 100.00% 100.00% 100.00% 100.00% 51.00% 50.00% 50.00% 51.00% 51.00% 100.00% 51.00% 100.00% 51.00% 100.00% 51.00% 51.00% 51.00% Consolidated Annual Report 2019Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Bungala One Property Holding Trust Barangaroo, Sydney Australia 100.00 AUD Bungala One Property Trust Barangaroo, Sydney Australia Bungala Two Finco (Pty) Ltd Barangaroo, Sydney Australia Bungala Two Operations Holding (Pty) Ltd Bungala Two Operations Holding Trust Barangaroo, Sydney Barangaroo, Sydney Australia Australia Bungala Two Operations (Pty) Ltd Barangaroo, Sydney Australia Bungala Two Operations Trust Barangaroo, Sydney Australia Bungala Two Property Holding (Pty) Ltd Bungala Two Property Holding Trust Barangaroo, Sydney Barangaroo, Sydney Australia Australia Bungala Two Property (Pty) Ltd Barangaroo, Sydney Australia - - - - - - - - - Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Equity Equity Equity Equity AUD AUD AUD AUD Renewables Equity AUD Renewables Equity AUD Renewables Equity AUD Electricity generation from renewable resources Equity AUD Renewables Equity AUD Renewables Equity Bungala Two Property Trust Barangaroo, Sydney Australia 1.00 AUD Renewables Equity Gauteng Republic of South Africa 100.00 ZAR Andover USA Overland Park USA - - USD USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Equity Line-by-line Enel Green Power RSA (Pty) Ltd 100.00% 100.00% Line-by-line Enel North America Inc. 100.00% 100.00% Business Venture Investments 1468 (Pty) Ltd Canastota Wind Power LLC Caney River Wind Project LLC Carbopego - Abastecimientos e Combustíveis SA Cascade Energy Storage LLC Castle Rock Ridge Limited Partnership Catalana d’Iniciatives SCR SA CCP.RO Bucharest SA Lisbon Portugal 50,000.00 EUR Fuel supply Equity Wilmington USA - USD Renewables Line-by-line Castiblanco Solar SL Madrid Spain 3,000.00 EUR Photovoltaic Line-by-line Calgary Canada - CAD Electricity generation from renewable resources Line-by-line Barcelona Spain 30,862,800.00 EUR Holding Bucharest Romania 79,800,000.00 RON Financial Cdec - Sic Ltda Santiago Chile 709,783,206.00 CLP - Cedar Run Wind Project LLC Celg Distribuição SA - Celg D Andover USA 1.00 USD Goiás Brazil 5,075,679,362.52 BRL Electricity generation and sale from renewable resources Electricity distribution and sale - - - Line-by-line Line-by-line Enel Brasil SA 99.93% 57.22% 363 Enel Green Power Bungala (Pty) Ltd Bungala One Property Holding (Pty) Ltd Bungala Two Property (Pty) Ltd Enel Green Power Bungala (Pty) Ltd Enel Green Power Bungala (Pty) Ltd Bungala Two Operations Holding (Pty) Ltd Bungala Two Operations Holding (Pty) Ltd Enel Green Power Bungala (Pty) Ltd Enel Green Power Bungala (Pty) Ltd Bungala Two Property Holding (Pty) Ltd Bungala Two Property Holding (Pty) Ltd 50.00% 50.00% 100.00% 51.00% 100.00% 51.00% 51.00% 51.00% 50.00% 50.00% 100.00% 51.00% 100.00% 51.00% 51.00% 51.00% 50.00% 50.00% 100.00% 51.00% 100.00% 51.00% Rocky Caney Wind LLC Endesa Generación Portugal SA Endesa Generación SA Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) Enel Green Power España SL Enel Alberta Wind Inc. Enel Green Power Canada Inc. Endesa Red SA (Sociedad Unipersonal) 100.00% 20.00% 0.01% 49.99% 35.05% 100.00% 100.00% 100.00% 70.10% 0.10% 99.90% 100.00% 0.94% 0.66% Enel Romania SA 9.52% 9.52% Empresa Eléctrica Panguipulli SA Tradewind Energy Inc. 6.00% 3.72% 100.00% 100.00% AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Central Dock Sud SA Buenos Aires Argentina 1,231,270,567.54 ARS Salvador Brazil 4,859,739.00 BRL Electricity generation, transmission and distribution Line-by-line Electricity generation and sale from renewable resources Line-by-line Enel Argentina SA Inversora Dock Sud SA Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda 0.25% 69.99% 100.00% 0.00% 23.05% 100.00% Niterói Brazil 758,950.00 BRL Energy services Line-by-line Enel X Brasil SA 100.00% 57.26% Fortaleza Brazil 151,940,000.00 BRL Thermal generation plantsLine-by-line Enel Brasil SA 100.00% 57.26% Seville Madrid Spain Spain 364,213.34 EUR Plant operation 595,000.00 EUR Plant operation Buenos Aires Argentina 500,000.00 ARS Electrical facilities construction Equity Equity Equity Madrid Spain - EUR Plant operation Equity Enel Green Power España SL Endesa Generación SA Central Dock Sud SA Enel Generación Costanera SA Enel Generación El Chocón SA Endesa Generación SA Nuclenor SA Slovenské elektrárne AS 33.30% 23.34% 33.33% 23.36% 6.40% 1.30% 14.53% 33.20% 23.57% 0.69% 16.76% 100.00% 33.00% Centrum Pre Vedu A Vyskum Sro Kalná Nad Hronom Slovakia 6,639.00 EUR Research and development in sciences and engineering Equity Milan Italy 8,550,000.00 EUR Testing, inspection and certification services, engineering and consulting services Equity Enel SpA 42.70% 42.70% Wilmington USA 1.00 USD Electricity generation from renewable resources Line-by-line Central Geradora Fotovoltaica Bom Nome Ltda Central Geradora Fotovoltaica São Francisco Ltda Central Geradora Termelétrica Fortaleza SA Central Hidráulica Güejar-Sierra SL Central Térmica de Anllares AIE Central Vuelta de Obligado SA Centrales Nucleares Almaraz-Trillo AIE CESI - Centro Elettrotecnico Sperimentale Italiano Giacinto Motta SpA Champagne Storage LLC Cherokee Falls Hydroelectric Project LLC Cheyenne Ridge Wind Project LLC Wilmington USA Andover USA Chi Black River LLC Wilmington USA Chi Idaho LLC Wilmington USA Chi Minnesota Wind LLC Wilmington USA - 1.00 - - - USD USD USD USD USD Chi Operations Inc. Andover USA 100.00 USD Chi Power Inc. Naples USA 100.00 USD Chi Power Marketing Inc. Wilmington USA 100.00 USD Chi West LLC San Francisco USA 100.00 USD Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) Enel North America Inc. 100.00% 100.00% 100.00% 100.00% Line-by-line Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel North America Inc. 100.00% 100.00% Line-by-line Enel North America Inc. 100.00% 100.00% Line-by-line Enel North America Inc. 100.00% 100.00% Line-by-line Enel North America Inc. 100.00% 100.00% Line-by-line Enel North America Inc. 100.00% 100.00% Line-by-line Enel North America Inc. 100.00% 100.00% Line-by-line Enel North America Inc. 100.00% 100.00% Electricity generation from renewable resources Electricity generation and sale from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Chinango SAC San Miguel Peru 295,249,298.00 SOL Electricity generation and sale from renewable resources Line-by-line Enel Generación Perú SAA 80.00% 38.30% 364 Consolidated Annual Report 2019Company name Headquarters Country Share capital Currency Activity Dover USA 100.00 USD Holding Line-by-line Wilmington USA Line-by-line Chisago Solar LLC Minnesota USA Chisholm View II Holding LLC Wilmington USA Chisholm View Wind Project II LLC Wilmington USA Chisholm View Wind Project LLC New York USA Cimarron Bend Assets LLC Wilmington USA Wilmington USA Cimarron Bend Wind Holdings I LLC Cimarron Bend Wind Holdings II LLC Cimarron Bend Wind Holdings LLC Cimarron Bend Wind Project I LLC Wilmington USA Cimarron Bend Wind Project II LLC Wilmington USA Cimarron Bend Wind Project III LLC Wilmington USA - - - - - - USD USD USD USD USD USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Equity Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line - - - - USD USD USD USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Consolidation method Held by % holding Group % holding Line-by-line Aurora Distributed Solar LLC 100.00% 51.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Chisholm View II Holding LLC 51.00% 51.00% EGPNA REP Wind Holdings LLC Cimarron Bend Wind Project I LLC Cimarron Bend Wind Project II LLC Cimarron Bend Wind Project III LLC Enel Kansas LLC Cimarron Bend Wind Holdings II LLC Cimarron Bend Wind Holdings LLC Enel North America Inc. 100.00% 20.00% 49.00% 49.00% 100.00% 1.00% 1.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Line-by-line Cimarron Bend Wind Holdings I LLC 100.00% 100.00% Line-by-line Cimarron Bend Wind Holdings I LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Enel Global Infrastructure and Networks Srl Tradewind Energy Inc. 3.79% 3.79% 100.00% 100.00% CivDrone Haifa Israel 1,000,000.00 ILS R&D - Clear Sky Wind Project LLC Andover USA Clinton Farms Wind Project LLC Andover USA 1.00 1.00 USD USD Codensa SA ESP Bogotá Colombia 13,487,545,000.00 COP Electricity generation and sale from renewable resources Electricity generation and sale from renewable resources Electricity distribution and sale Line-by-line Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Américas SA 48.30% 27.66% Cogeneración El Salto SL Zaragoza Cogenio Srl Rome Spain Italy 36,060.73 EUR Cogeneration of electricity and heat Equity Enel Green Power España SL 20.00% 14.02% 2,310,000.00 EUR - Equity Enel.si Srl 20.00% 20.00% Cohuna Solar Farm (Pty) Ltd Barangaroo, Sydney Australia 100.00 AUD Electricity generation from renewable resources Line-by-line Cohuna Solar Farm Trust Barangaroo, Sydney Australia Andover USA - 1.00 AUD Renewable energy Line-by-line USD Electricity generation and sale from renewable resources Line-by-line Cadiz Spain 600,000.00 EUR Electricity transmission, distribution and sale Equity Enel Green Power Cohuna Holdings (Pty) Ltd Enel Green Power Cohuna Trust Tradewind Energy Inc. Endesa Red SA (Sociedad Unipersonal) 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 33.50% 23.48% Rome Italy 14,730,800.00 EUR Construction of port infrastructure Equity Enel Produzione SpA 25.00% 25.00% Fortaleza Brazil 808,246,885.77 BRL Electricity distribution Line-by-line Enel Brasil SA 74.05% 42.40% 365 Comanche Crest Ranch LLC Comercializadora Eléctrica de Cádiz SA Compagnia Porto di Civitavecchia SpA in liquidation Companhia Energética do Ceará - Coelce AttachmentsCompañía de Transmisión del Mercosur Ltda - CTM Compañía Energética Veracruz SAC Compañía Eólica Tierras Altas SA Coneross Power Corporation Inc. CONSEL - Consorzio ELIS per la formazione professionale superiore Consolidated Hydro New York LLC Consolidated Hydro Southeast LLC Consolidated Pumped Storage Inc. Consorzio Civita in liquidation Copenhagen Hydro LLC Corporación Empresarial de Extremadura SA Cow Creek Wind Project LLC Cranberry Point Energy Storage LLC Crucero de Atacama SpA Crucero Este Dos SpA Crucero Este Tres SpA Crucero Este Uno SpA Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Buenos Aires Argentina 14,012,000.00 ARS Electricity generation, transmission and distribution Line-by-line Enel CIEN SA Enel SpA 100.00% 0.00% 57.26% San Miguel Peru 2,886,000.00 SOL Hydroelectric projects Line-by-line Enel Perú SAC 100.00% 57.26% Soria Spain 13,222,000.00 EUR Wind projects Equity Concert Srl Rome Italy 10,000.00 EUR Greenville USA 110,000.00 USD Product, plant and equipment certification Electricity generation from renewable resources Line-by-line Line-by-line Compañía Eólica Tierras Altas SA Enel Green Power España SL Enel Produzione SpA Enel North America Inc. 5.00% 35.63% 26.29% 100.00% 100.00% 100.00% 100.00% Rome Italy 51,000.00 EUR Training Equity OpEn Fiber SpA 1.00% 0.50% Consolidated Hydro New Hampshire LLC Wilmington USA Wilmington USA Wilmington USA - - - USD USD USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Enel North America Inc. 100.00% 100.00% Equity EGPNA REP Hydro Holdings LLC 100.00% 50.00% Line-by-line Enel North America Inc. 100.00% 100.00% Line-by-line Enel North America Inc. 81.83% 81.83% Wilmington USA 550,000.00 USD Rome Italy 156,000.00 EUR - - Enel SpA 33.30% 33.30% Wilmington USA - USD Electricity generation from renewable resources Equity EGPNA REP Hydro Holdings LLC 100.00% 50.00% Badajoz Spain 44,538,000.00 EUR Regional development - Endesa SA 1.01% 0.71% Corporación Eólica de Zaragoza SL La Puebla de Alfinden Spain 271,652.00 EUR Equity Enel Green Power España SL 25.00% 17.53% Andover USA 1.00 USD Line-by-line 100.00 USD Renewables Line-by-line Dover Santiago Santiago Santiago Santiago USA Chile Chile Chile Chile 10,000,000.00 209,755,678.00 273,188,329.00 1,000,000.00 Electricity generation from renewable resources Electricity generation and sale from renewable resources CLP CLP CLP CLP ZAR Electricity generation purchase and sale Electricity generation purchase and sale Electricity generation purchase and sale Electricity generation purchase and sale Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Line-by-line Line-by-line Line-by-line Line-by-line Line-by-line Tradewind Energy Inc. Enel North America Inc. Enel Green Power del Sur SpA Enel Green Power del Sur SpA Enel Green Power del Sur SpA Enel Green Power del Sur SpA Enel Green Power RSA (Pty) Ltd Enel Green Power Romania Srl Enel Green Power SpA Enel Green Power España SL 100.00% 100.00% 100.00% 100.00% 100.00% 61.93% 100.00% 61.93% 100.00% 61.93% 100.00% 61.93% 100.00% 100.00% 100.00% 0.00% 100.00% 100.00% 70.10% Danax Energy (Pty) Ltd Sandton Republic of South Africa 100.00 De Rock Int’l Srl Bucharest Romania 5,629,000.00 RON Seville Spain 3,000.00 EUR Dehesa de los Guadalupes Solar SLU 366 Consolidated Annual Report 2019Desarrollo de Fuerzas Renovables S de RL de Cv Di.T.N.E. -- Distretto Tecnologico Nazionale sull’Energia - Società Consortile a Responsabilità Limitata Diamond Vista Holdings LLC Diego de Almagro Matriz SpA Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Dehesa Pv Farm 03 SLU Dehesa Pv Farm 04 SLU Depuración Destilación Reciclaje SL Valencia Valencia Spain Spain 3,000.00 EUR Photovoltaic systems Line-by-line 3,000.00 EUR Photovoltaic plants Line-by-line Boiro Spain 600,000.00 EUR Electricity generation from renewable resources Equity Enel Green Power España SL Enel Green Power España SL Enel Green Power España SL 100.00% 70.10% 100.00% 70.10% 40.00% 28.04% Derivex SA Bogotá Colombia 715,292,000.00 COP Finance - Emgesa SA ESP 5.00% 1.39% Mexico City Mexico 33,101,350.00 MXN Electricity generation from renewable resources Line-by-line Enel Green Power México S de RL de Cv Energía Nueva Energía Limpia México S de RL de Cv 99.99% 0.01% 100.00% Rome Italy 398,321.50 EUR Research and development in natural sciences and engineering - Enel Produzione SpA 1.89% 1.89% Wilmington USA 1.00 USD Holding Line-by-line Enel Kansas LLC 100.00% 100.00% Santiago Chile 351,604,338.00 CLP Dietrich Drop LLC Wilmington USA - USD Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Empresa Eléctrica Panguipulli SA 100.00% 61.93% Equity EGPNA REP Hydro Holdings LLC 100.00% 50.00% Distribuidora de Energía Eléctrica del Bages SA Distribuidora Eléctrica del Puerto de La Cruz SA Distrilec Inversora SA Dmd Holding AS (in liquidation) Dodge Center Distributed Solar LLC Dolores Wind SA de Cv Dominica Energía Limpia SA de Cv Dorset Ridge Wind Project LLC Drift Sand Wind Holdings LLC Drift Sand Wind Project LLC Barcelona Spain 108,240.00 EUR Electricity distribution and sale Line-by-line Santa Cruz de Tenerife Spain 12,621,210.00 EUR Electricity purchase, transmission and distribution Line-by-line Endesa Red SA (Sociedad Unipersonal) Hidroeléctrica de Catalunya SL Endesa Red SA (Sociedad Unipersonal) 55.00% 45.00% 70.10% 100.00% 70.10% Buenos Aires Argentina 497,612,021.00 ARS Holding Line-by-line Enel Américas SA 51.50% 29.49% Trenčín-Zlatovce Slovakia 199,543,284.87 EUR Electricity generation - Slovenské elektrárne AS 2.94% 0.97% Wilmington USA - USD Mexico City Mexico 100.00 MXN Mexico City Mexico 2,070,600,646.00 MXN Andover USA 1.00 Wilmington USA Wilmington USA - - USD USD USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation and sale from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Aurora Distributed Solar LLC 100.00% 51.00% Line-by-line Equity Enel Rinnovabile SA de Cv Hidroelectricidad del Pacífico S de RL de Cv Tenedora de Energía Renovable Sol y Viento SAPI de Cv 99.00% 1.00% 100.00% 60.80% 20.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Equity Enel Kansas LLC 50.00% 50.00% Equity Drift Sand Wind Holdings LLC 100.00% 50.00% E.S.CO. Comuni Srl Bergamo Italy 1,000,000.00 EUR Electricity sale Line-by-line YouSave SpA 60.00% 60.00% Eastwood Solar LLC Wilmington USA - USD Electricity generation from renewable resources Line-by-line Aurora Distributed Solar LLC 100.00% 51.00% 367 AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Edistribución Redes Digitales SL (Sociedad Unipersonal) E-Distribuţie Banat SA E-Distribuţie Dobrogea SA E-Distribuţie Muntenia SA Madrid Spain 1,204,540,060.00 EUR Electricity distribution Line-by-line Endesa Red SA (Sociedad Unipersonal) 100.00% 70.10% Timisoara Romania 382,158,580.00 RON Electricity distribution Line-by-line Enel SpA 51.00% 51.00% Constanţa Romania 280,285,560.00 RON Electricity distribution Line-by-line Enel SpA 51.00% 51.00% Bucharest Romania 271,635,250.00 RON Electricity distribution Line-by-line Enel SpA 78.00% 78.00% e-distribuzione SpA Rome Italy 2,600,000,000.00 EUR Electricity distribution Line-by-line Enel SpA 100.00% 100.00% EF Divesture LLC Andover USA 1.00 USD Efficientya Srl Bergamo Italy 100,000.00 EUR EGP BioEnergy Srl Rome Italy 1,000,000.00 EUR Electricity generation and sale from renewable resources Testing, inspection and certification services, engineering and consulting services Electricity generation from renewable resources Line-by-line Tradewind Energy Inc. 100.00% 100.00% Equity YouSave SpA 50.00% 50.00% Line-by-line Enel Green Power Puglia Srl 100.00% 100.00% EGP Geronimo Holding Company Inc. Wilmington USA 1,000.00 USD Holding Line-by-line Enel North America Inc. 100.00% 100.00% EGP HoldCo 1 LLC Andover EGP HoldCo 10 LLC Andover EGP HoldCo 11 LLC Andover EGP HoldCo 12 LLC Andover EGP HoldCo 13 LLC Andover EGP HoldCo 14 LLC Andover EGP HoldCo 15 LLC Andover EGP HoldCo 16 LLC Andover EGP HoldCo 17 LLC Andover EGP HoldCo 18 LLC Andover EGP HoldCo 2 LLC Andover EGP HoldCo 3 LLC Andover EGP HoldCo 4 LLC Andover EGP HoldCo 5 LLC Andover EGP HoldCo 6 LLC Andover EGP HoldCo 7 LLC Andover EGP HoldCo 8 LLC Andover EGP HoldCo 9 LLC Andover USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA - - - - - - - - - - - - - - - - - - USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD Electricity generation from renewable resources Line-by-line Enel Kansas LLC 100.00% 100.00% Holding. Electricity sale Line-by-line Enel Kansas LLC 100.00% 100.00% Holding. Electricity sale Line-by-line Enel Kansas LLC 100.00% 100.00% Holding. Electricity sale Line-by-line Enel Kansas LLC 100.00% 100.00% Holding. Electricity sale Line-by-line Enel Kansas LLC 100.00% 100.00% Holding. Electricity sale Line-by-line Enel Kansas LLC 100.00% 100.00% Holding. Electricity sale Line-by-line Enel Kansas LLC 100.00% 100.00% Holding. Electricity sale Line-by-line Enel Kansas LLC 100.00% 100.00% Holding. Electricity sale Line-by-line Enel Kansas LLC 100.00% 100.00% Holding. Electricity sale Line-by-line Enel Kansas LLC 100.00% 100.00% Holding. Electricity sale Line-by-line Enel Kansas LLC 100.00% 100.00% Holding. Electricity sale Line-by-line Enel Kansas LLC 100.00% 100.00% Holding. Electricity sale Line-by-line Enel Kansas LLC 100.00% 100.00% Holding. Electricity sale Line-by-line Enel Kansas LLC 100.00% 100.00% Holding. Electricity sale Line-by-line Enel Kansas LLC 100.00% 100.00% Holding. Electricity sale Line-by-line Enel Kansas LLC 100.00% 100.00% Holding. Electricity sale Line-by-line Enel Kansas LLC 100.00% 100.00% Holding. Electricity sale Line-by-line Enel Kansas LLC 100.00% 100.00% Mexico City Mexico 100.00 MXN Renewables Line-by-line Enel Rinnovabile SA de Cv Hidroelectricidad Del Pacífico S de RL de Cv Enel North America Inc. Enel North America Inc. 99.00% 1.00% 100.00% 100.00% 100.00% 100.00% 100.00% Line-by-line Enel North America Inc. 100.00% 100.00% - - - USD Renewables Line-by-line USD USD Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line EGP Magdalena Solar SA de Cv EGP Nevada Power LLC EGP Salt Wells Solar LLC Wilmington USA Wilmington USA EGP San Leandro Microgrid I LLC Wilmington USA 368 Consolidated Annual Report 2019Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Wilmington USA Wilmington USA 1.00 Los Angeles USA Wilmington USA EGP Solar 1 LLC Andover USA EGP Stillwater Solar LLC EGP Stillwater Solar Pv II LLC EGP Timber Hills Project LLC EGPNA Development Holdings LLC EGPNA Hydro Holdings LLC EGPNA Preferred Holdings II LLC EGPNA Preferred Wind Holdings LLC EGPNA Project HoldCo 1 LLC EGPNA Project HoldCo 2 LLC EGPNA Project HoldCo 3 LLC EGPNA Project HoldCo 4 LLC EGPNA Project HoldCo 5 LLC EGPNA Project HoldCo 6 LLC EGPNA Project HoldCo 7 LLC EGPNA REP Holdings LLC EGPNA REP Hydro Holdings LLC EGPNA REP Solar Holdings LLC EGPNA REP Wind Holdings LLC EGPNA Wind Holdings 1 LLC Wilmington Wilmington Wilmington Dover Dover Dover Dover Dover Dover Dover Wilmington Wilmington Wilmington USA USA USA USA USA USA USA USA USA USA USA USA USA USA EGPNA Renewable Energy Partners LLC Wilmington Wilmington USA Wilmington USA El Dorado Hydro LLC Wilmington USA - - - - - - - 100.00 100.00 100.00 100.00 100.00 100.00 100.00 - - - - - - - USD USD USD USD USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line USD Holding Line-by-line USD Holding Line-by-line USD Holding Line-by-line USD Holding Line-by-line USD Holding Line-by-line USD Holding Line-by-line USD Holding Line-by-line USD Holding Line-by-line USD Holding Line-by-line USD Holding Line-by-line USD Joint Venture Equity USD Holding Line-by-line USD Holding Equity USD Holding Line-by-line USD USD USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Equity Equity Equity El Paso Solar SAS ESP Bogotá Colombia 91,694,000.00 COP Electricity generation Line-by-line Elcogas SA in liquidation Puertollano (Ciudad Real) Spain 809,690.40 EUR Electricity sale Equity Elcomex Solar Energy Srl Bucharest Romania 4,590,000.00 RON Elecgas SA Pego Portugal 50,000.00 EUR Electra Capital (Rf) (Pty) Ltd Gauteng Republic of South Africa 10,000,000.00 ZAR Electricity generation from renewable resources Line-by-line Electricity sale combined cycle Equity Electricity generation from renewable resources Line-by-line Line-by-line EGPNA REP Solar Holdings LLC 100.00% 100.00% Line-by-line Enel Stillwater LLC 100.00% 100.00% Line-by-line Stillwater Woods Hill Holdings LLC 100.00% 100.00% Line-by-line Padoma Wind Power LLC 100.00% 100.00% Enel Green Power North America Development LLC Enel North America Inc. Enel North America Inc. Enel North America Inc. Enel North America Inc. Enel North America Inc. Enel North America Inc. Enel North America Inc. Enel North America Inc. Enel North America Inc. Enel North America Inc. EGPNA REP Holdings LLC Enel North America Inc. EGPNA REP Holdings LLC Enel North America Inc. 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 20.00% 20.00% 100.00% 100.00% 50.00% 50.00% 100.00% 100.00% EGPNA Renewable Energy Partners LLC 100.00% 20.00% EGPNA REP Wind Holdings LLC 100.00% 20.00% EGPNA REP Hydro Holdings LLC Enel Green Power Colombia SAS ESP Endesa Generación SA Enel SpA Enel Green Power Romania Srl Enel Green Power SpA Endesa Generación Portugal SA Enel Green Power RSA (Pty) Ltd 100.00% 50.00% 100.00% 100.00% 40.99% 4.32% 100.00% 0.00% 33.05% 100.00% 50.00% 35.05% 60.00% 60.00% 369 AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Eléctrica de Jafre SA Gerona Spain 165,876.00 EUR Electricity distribution and sale Line-by-line Eléctrica de Lijar Sl Cadiz Spain 1,081,821.79 EUR Electricity transmission and distribution Equity Tarragona Spain 500,000.00 EUR Electricity supply Line-by-line Cadiz Spain 4,960,246.40 EUR Barcelona Spain 2,906,862.00 EUR Electricity distribution and sale Equity Electricity generation from renewable resources - Eléctrica del Ebro SA (Sociedad Unipersonal) Electricidad de Puerto Real SA Electrometalúrgica del Ebro SL Eletropaulo Metropolitana Eletricidade de São Paulo SA Endesa Red SA (Sociedad Unipersonal) Hidroeléctrica de Catalunya SL Endesa Red SA (Sociedad Unipersonal) Endesa Red SA (Sociedad Unipersonal) Endesa Red SA (Sociedad Unipersonal) 52.54% 47.46% 70.10% 50.00% 35.05% 100.00% 70.10% 50.00% 35.05% Enel Green Power España SL 0.18% 0.12% Barueri Brazil 3,079,524,934.33 BRL Electricity distribution Line-by-line Enel Brasil SA 100.00% 57.26% Elini Antwerp Belgium 31,855,683.05 EUR Insurance - Slovenské elektrárne AS 4.26% 1.41% Elk Creek Hydro LLC Wilmington USA - Emerging Networks Latam Inc. Emerging Networks Panama SA Wilmington USA 100.00 Panama City Republic of Panama 1,000.00 USD USD USD Emgesa SA ESP Bogotá Colombia 655,222,312,800.00 COP Electricity generation from renewable resources Line-by-line Enel North America Inc. 100.00% 100.00% - - Electricity generation and sale Equity Equity Ifx Networks Ltd 100.00% 20.60% Ifx/eni - Spc Panama Inc. 100.00% 20.60% Line-by-line Enel Américas SA 48.48% 27.76% Seville Madrid Spain Spain 3,000.00 EUR Photovoltaic Line-by-line 18,030,000.00 EUR Mining Line-by-line Ceuta Spain 9,335,000.00 EUR Electricity distribution Line-by-line Ceuta Spain 16,562,250.00 EUR Holding Line-by-line San Miguel Peru 7,928,044.00 SOL San Miguel Peru 3,368,424.00 SOL Electricity generation, transmission, distribution purchase and sale Line-by-line Electricity generation, transmission, distribution purchase and sale Line-by-line Santiago Chile 250,428,941.00 CLP Electricity transmission Line-by-line Buenos Aires Argentina 898,585,028.00 ARS Santiago Chile 82,222,000.00 CLP Santiago Chile 48,038,937.00 CLP Santiago Chile 175,774,920,733.00 CLP Electricity distribution and sale Line-by-line Electricity generation, transmission and distribution Electricity generation from renewable resources Electricity generation, transmission and distribution Line-by-line Line-by-line Line-by-line Enel Green Power España SL Endesa Generación SA 100.00% 70.10% 100.00% 70.10% Empresa de Alumbrado Eléctrico de Ceuta SA 100.00% 67.50% Endesa Red SA (Sociedad Unipersonal) Enel Green Power Perú SAC Energética Monzón SAC Enel Green Power Perú SAC Energética Monzón SAC Empresa Eléctrica de Colina Ltda Enel Distribución Chile SA Distrilec Inversora SA Enel Argentina SA Enel Chile SA Enel Distribución Chile SA Enel Chile SA Enel Green Power Chile Ltda Enel Generación Chile SA 96.29% 67.50% 100.00% 0.00% 100.00% 100.00% 100.00% 0.00% 0.10% 99.90% 56.36% 43.10% 0.00% 100.00% 0.04% 99.96% 61.36% 41.30% 61.36% 61.93% 92.65% 53.67% Emintegral Cycle SLU Empresa Carbonífera del Sur SA Empresa de Alumbrado Eléctrico de Ceuta Distribución SA (Sociedad Unipersonal) Empresa de Alumbrado Eléctrico de Ceuta SA Empresa de Generación Eléctrica Los Pinos SA Empresa de Generación Eléctrica Marcona SAC Empresa de Transmisión Chena SA Empresa Distribuidora Sur SA - Edesur Empresa Eléctrica de Colina Ltda Empresa Eléctrica Panguipulli SA Empresa Eléctrica Pehuenche SA 370 Consolidated Annual Report 2019Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Empresa Nacional de Geotermia SA Empresa Propietaria de La Red SA Santiago Chile 12,647,789,439.24 CLP Electricity generation from renewable resources Line-by-line Enel Green Power Chile Ltda 51.00% 31.58% Panama City Panama 58,500,000.00 USD Electricity transmission and distribution - Enel SpA 11.11% 11.11% Endesa Capital SA Madrid Spain 60,200.00 EUR Finance Line-by-line Endesa SA 100.00% 70.10% Endesa Comercialização de Energia SA Endesa Energía Renovable SL (Sociedad Unipersonal) Porto Portugal 250,000.00 EUR Electricity generation and sale Line-by-line Endesa Energía SA 100.00% 70.10% Madrid Spain 100,000.00 EUR Electricity supply Line-by-line Endesa Energía SA 100.00% 70.10% Endesa Energía SA Madrid Spain 14,919,195.32 EUR Marketing of energy products Line-by-line Endesa SA 100.00% 70.10% Madrid Spain 4,621,003,006.00 EUR Finance Line-by-line Endesa SA 100.00% 70.10% Seville Seville Spain Spain 60,000.00 EUR Subholding company in the nuclear sector Line-by-line 63,107.00 EUR Electricity sale Line-by-line Endesa SA 100.00% 70.10% Endesa Generación SA Endesa Energía SA Endesa Generación SA Enel Green Power España SL 100.00% 70.10% 0.20% 99.20% 70.10% 0.60% Lisbon Portugal 50,000.00 EUR Electricity sale Line-by-line Seville Spain 1,940,379,735.35 EUR Electricity generation and sale Line-by-line Endesa SA 100.00% 70.10% Seville Spain 1,000,000.00 EUR Consulting and engineering services Line-by-line Endesa Red SA (Sociedad Unipersonal) 100.00% 70.10% Madrid Spain 89,999,790.00 EUR Services Line-by-line Endesa SA 100.00% 70.10% Madrid Spain 10,138,580.00 EUR Services Line-by-line Endesa Energía SA 100.00% 70.10% London United Kingdom 2.00 GBP Trading Line-by-line Endesa SA 100.00% 70.10% Madrid Spain 719,901,723.26 EUR Electricity distribution Line-by-line Endesa SA 100.00% 70.10% Madrid Madrid Spain Spain 1,270,502,540.40 EUR Holding Line-by-line Enel Iberia SLU 70.10% 70.10% 3,000.00 EUR Marketing of energy products Line-by-line Endesa Energía SA 100.00% 70.10% Madrid Spain 60,000.00 EUR Services Line-by-line Endesa SA 100.00% 70.10% Endesa Financiación Filiales SA Endesa Generación II SA Endesa Generación Nuclear SA Endesa Generación Portugal SA Endesa Generación SA Endesa Ingeniería SLU Endesa Medios y Sistemas SL (Sociedad Unipersonal) Endesa Operaciones y Servicios Comerciales SL Endesa Power Trading Ltd Endesa Red SA (Sociedad Unipersonal) Endesa SA Endesa Soluciones SLU Endesa X SA (Sociedad Unipersonal) Enel Alberta Wind Inc. Calgary Canada 16,251,021.00 CAD Enel Américas SA Santiago Chile 9,783,875,314.43 USD Electricity generation from renewable resources Holding. Electricity generation and distribution Line-by-line Enel Green Power Canada Inc. 100.00% 100.00% Line-by-line Enel SpA 57.26% 57.26% Enel And Shikun & Binui Innovation Infralab Ltd Airport City Israel 38,000.00 ILS Legal services Equity Enel Argentina SA Buenos Aires Argentina 2,297,711,908.00 ARS Holding Line-by-line Enel Bella Energy Storage LLC Delaware USA - USD Renewable energy Line-by-line Enel Global Infrastructure and Networks Srl Enel Américas SA Enel Generación Chile SA Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) 50.00% 50.00% 99.92% 0.08% 57.26% 100.00% 100.00% 371 AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Enel Brasil SA Niterói Brazil 16,158,210,421.21 BRL Holding Line-by-line Enel Américas SA Enel Brasil SA 99.16% 0.84% 57.26% Enel Chile SA Santiago Chile 3,882,103,470,184.00 CLP Enel CIEN SA Niterói Brazil 285,044,682.00 BRL Enel Cove Fort II LLC Wilmington USA Enel Cove Fort LLC Beaver USA - - USD USD Enel Distribución Chile SA Enel Distribución Perú SAA Santiago Chile 230,137,979,938.00 CLP San Miguel 638,563,900.00 SOL Peru Italy Holding. Electricity generation and distribution Electricity generation, transmission and distribution Electricity generation from renewable resources Electricity generation from renewable resources Holding. Electricity distribution Electricity distribution and sale Line-by-line Enel SpA 61.93% 61.93% Line-by-line Enel Brasil SA 100.00% 57.26% Line-by-line Enel North America Inc. 100.00% 100.00% Line-by-line Enel Geothermal LLC 100.00% 100.00% Line-by-line Enel Chile SA 99.09% 61.36% Line-by-line Enel Perú SAC 83.15% 47.61% Enel Energia SpA Rome 302,039.00 EUR Gas and electricity sale Line-by-line Enel SpA 100.00% 100.00% Enel Energía SA de Cv Enel Energie Muntenia SA Mexico City Mexico 25,000,100.00 MXN Electricity generation from renewable resources Line-by-line Enel Green Power México S de RL de Cv Energía Nueva de Iguu S de RL de Cv 100.00% 0.00% 100.00% Bucharest Romania 37,004,350.00 RON Electricity sale Line-by-line Enel SpA 78.00% 78.00% Enel Energie SA Bucharest Romania 140,000,000.00 RON Electricity sale Line-by-line Enel SpA 51.00% 51.00% Enel Energy Australia (Pty) Ltd Barangaroo, Sydney Australia 100.00 AUD Electricity sale Line-by-line Enel Energy South Africa Wilmington Republic of South Africa 100.00 ZAR Line-by-line Enel Green Power Australia (Pty) Ltd Enel X International Srl 100.00% 100.00% 100.00% 100.00% Andover USA 100.00 USD Line-by-line Enel North America Inc. 100.00% 100.00% Wilmington USA 200,000,000.00 USD Finance Line-by-line Amsterdam Netherlands 1,478,810,371.00 EUR Finance Line-by-line Enel Holding Finance Srl 100.00% 100.00% Enel Holding Finance Srl Enel SpA 75.00% 25.00% 100.00% Enel Fortuna SA Panama City Panama 100,000,000.00 USD Santiago Chile 552,777,320,871.00 CLP Buenos Aires Argentina 701,988,378.00 Buenos Aires Argentina 298,584,050.00 ARS ARS Electricity generation from renewable resources Electricity generation, transmission and distribution Electricity generation and sale Electricity generation and sale Line-by-line Enel Green Power Panamá Srl 50.06% 50.06% Line-by-line Enel Chile SA 93.55% 57.93% Line-by-line Enel Argentina SA 75.68% 43.34% Line-by-line Enel Argentina SA Hidroinvest SA 8.67% 59.00% 37.64% San Miguel San Miguel Peru Peru 2,498,101,267.20 SOL Electricity generation Line-by-line Enel Perú SAC 83.60% 47.87% 73,982,594.00 SOL Electricity generation Line-by-line Enel Perú SAC 96.50% 55.26% Mexico City Mexico 7,100,100.00 MXN Electricity generation Line-by-line Wilmington USA - USD Electricity generation from renewable resources Line-by-line Enel Green Power México S de RL de Cv Energía Nueva de Iguu S de RL de Cv Enel North America Inc. 100.00% 0.00% 100.00% 100.00% 100.00% Electricity generation from renewable resources Electricity generation from renewable resources Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) Enel Finance America LLC Enel Finance International NV Enel Generación Chile SA Enel Generación Costanera SA Enel Generación El Chocón SA Enel Generación Perú SAA Enel Generación Piura SA Enel Generación SA de Cv Enel Geothermal LLC 372 Consolidated Annual Report 2019Enel Global Infrastructure and Networks Srl Enel Global Services Srl Enel Global Thermal Generation Srl Enel Global Trading SpA Enel Green Power Newfoundland and Labrador Inc. Enel Green Power Argentina SA Enel Green Power Boa Vista Eólica SA Enel Green Power Brasil Participações Ltda Enel Green Power Bulgaria EAD Enel Green Power Calabria Srl Enel Green Power Canada Inc. Enel Green Power Chile Ltda Enel Green Power Cohuna Holdings (Pty) Ltd Enel Green Power Colombia SAS ESP Enel Green Power Costa Rica SA Enel Green Power Cove Fort Solar LLC Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Rome Italy 10,100,000.00 EUR Rome Italy 10,000.00 EUR Rome Italy 11,000,000.00 EUR Metering, remote control and connectivity services via power line communication Engineering and consulting services Business consulting, administrative and management consulting and corporate planning Line-by-line Enel SpA 100.00% 100.00% Line-by-line Enel SpA 100.00% 100.00% Line-by-line Enel SpA 100.00% 100.00% Rome Italy 90,885,000.00 EUR Fuel trading and logistics Line-by-line Enel SpA 100.00% 100.00% Newfoundland Canada 1,000.00 CAD Buenos Aires Argentina 82,534,295.00 ARS Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Equity Line-by-line Line-by-line Enel Green Power Australia (Pty) Ltd Barangaroo, Sydney Enel Green Power Australia Trust Barangaroo, Sydney Australia 100.00 AUD Australia 100.00 AUD Renewables Line-by-line Niterói Brazil 122,952,830.00 BRL Wind plants Line-by-line Niterói Brazil 7,161,724,678.00 BRL Holding Line-by-line Sofia Bulgaria 35,231,000.00 BGN Australia 100.00 AUD Plant construction operation and maintenance Electricity generation from renewable resources Line-by-line Line-by-line Enel Green Power Bungala (Pty) Ltd Barangaroo, Sydney Enel Green Power Bungala Trust Barangaroo, Sydney Australia - AUD Renewables Line-by-line Enel Green Power Cabeça de Boi SA Niterói Brazil 270,114,539.00 BRL Electricity generation and sale from renewable resources Line-by-line Enel Green Power Cachoeira Dourada SA Cachoeira Dourada Brazil 64,339,835.85 BRL Electricity generation and sale Line-by-line Rome Italy 10,000.00 EUR Montreal Canada 85,681,857.00 CAD Santiago Chile 842,086,000.00 USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Barangaroo, Sydney Australia 100.00 AUD Holding Line-by-line Enel Green Power Cohuna Trust Barangaroo, Sydney Australia - AUD Renewables Line-by-line EGPNA REP Wind Holdings LLC Enel Green Power SpA Energía y Servicios South America SpA Enel Green Power SpA Enel Green Power SpA Enel Green Power Brasil Participações Ltda Enel Green Power SpA Energía y Servicios South America SpA Enel Green Power SpA Enel Green Power Australia (Pty) Ltd Enel Green Power Australia (Pty) Ltd Enel Green Power Brasil Participações Ltda Enel Brasil SA Enel Green Power Cachoeira Dourada SA Enel Green Power SpA 100.00% 20.00% 99.24% 0.76% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 99.61% 0.15% 57.12% 100.00% 100.00% Line-by-line Enel North America Inc. 100.00% 100.00% Line-by-line Enel Chile SA Enel SpA 99.99% 0.01% 61.93% Enel Green Power Australia (Pty) Ltd Enel Green Power Australia Trust Enel Green Power SpA 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Bogotá Colombia 3,387,243,000.00 COP San José Costa Rica 27,500,000.00 USD Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Energía y Servicios South America SpA 100.00% 100.00% Wilmington USA 1.00 USD - Line-by-line Enel Kansas LLC 100.00% 100.00% 373 AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Schenkenberg Germany 1,000.00 EUR Plant construction, operation Line-by-line Enel Green Power Germany GmbH 90.00% 90.00% Enel Green Power Cremzow GmbH & Co. Kg Enel Green Power Cremzow Verwaltungs GmbH Enel Green Power Cristal Eólica SA Schenkenberg Germany 25,000.00 EUR Business services Line-by-line Niterói Brazil 144,784,899.00 BRL Electricity generation and sale from renewable resources Line-by-line Enel Green Power Germany GmbH Enel Green Power Brasil Participações Ltda Enel Green Power Cristal Eólica SA Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Chile SA Enel Green Power Chile Ltda 90.00% 90.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 99.17% 0.83% 100.00% 0.00% 100.00% 0.00% 100.00% 0.00% 100.00% 0.00% 100.00% 0.00% 99.90% 0.10% 99.90% 0.10% 99.90% 0.10% 99.16% 100.00% 61.93% 0.84% 0.00% 100.00% Enel Green Power Cumaru 01 SA Niterói Brazil 100,001,000.00 BRL Electricity generation and sale from renewable resources Line-by-line Enel Green Power Cumaru 02 SA Niterói Brazil 100,001,000.00 BRL Electricity generation and sale from renewable resources Line-by-line Enel Green Power Cumaru 03 SA Niterói Brazil 100,001,000.00 BRL Electricity generation and sale from renewable resources Line-by-line Enel Green Power Cumaru 04 SA Niterói Brazil 100,001,000.00 BRL Electricity generation and sale from renewable resources Line-by-line Enel Green Power Cumaru 05 SA Niterói Brazil 100,001,000.00 BRL Electricity generation and sale from renewable resources Line-by-line Enel Green Power Cumaru 07 SA Niterói Brazil 1,000.00 BRL Electricity generation and sale from renewable resources Line-by-line Enel Green Power Cumaru 6 SA Niterói Brazil 1,000.00 BRL Electricity generation and sale from renewable resources Line-by-line Niterói Brazil 1,000.00 BRL Holding Line-by-line Niterói Brazil 83,709,003.00 BRL Santiago Chile 355,605,313.00 USD Electricity generation from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Enel Green Power Cumaru Participações SA Enel Green Power Damascena Eólica SA Enel Green Power del Sur SpA 374 Consolidated Annual Report 2019Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Enel Green Power Delfina A Eólica SA Enel Green Power Delfina B Eólica SA Enel Green Power Delfina C Eólica SA Enel Green Power Delfina D Eólica SA Enel Green Power Delfina E Eólica SA Enel Green Power Desenvolvimento Ltda Enel Green Power Development Srl Enel Green Power Diamond Vista Wind Project LLC Enel Green Power Dois Riachos Eólica SA Enel Green Power Egypt SAE Enel Green Power Elkwater Wind Limited Partnership Enel Green Power El Salvador SA de Cv (in liquidation) Enel Green Power Emiliana Eólica SA Enel Green Power España SL Enel Green Power Esperança Eólica SA Enel Green Power Fazenda SA Enel Green Power Fontes dos Ventos 2 SA Niterói Brazil 549,062,483.00 BRL Niterói Brazil 93,538,826.00 BRL Niterói Brazil 39,558,322.00 BRL Niterói Brazil 113,170,233.00 BRL Niterói Brazil 115,923,464.00 BRL Niterói Brazil 33,474,258.38 BRL Rome Italy 20,000.00 EUR Wilmington USA 1.00 USD Niterói Brazil 130,354,009.00 BRL Cairo Egypt 250,000.00 EGP Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Plant construction Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Management, operation and maintenance of all types of generation plant and their distribution grids Line-by-line Line-by-line Line-by-line Line-by-line Line-by-line Line-by-line Line-by-line Enel Green Power Brasil Participações Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Brasil Participações Ltda Energía y Servicios South America SpA Enel Green Power SpA 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% 100.00% 100.00% Line-by-line Diamond Vista Holdings LLC 100.00% 100.00% Line-by-line Enel Green Power Brasil Participações Ltda 100.00% 100.00% Line-by-line Enel Green Power SpA 100.00% 100.00% Calgary Canada 1,000.00 CAD Holding Line-by-line - El Salvador - SVC Electricity generation from renewable resources Line-by-line Niterói Brazil 150,191,530.00 BRL W Line-by-line Seville Spain 11,152.74 EUR Niterói Brazil 129,418,174.00 BRL Niterói Brazil 264,141,174.00 BRL Niterói Brazil 121,001,000.00 BRL Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Enel Alberta Wind Inc. Enel Green Power Canada Inc. Enel Green Power SpA Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Emiliana Eólica SA Endesa Generación SA Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda 1.00% 99.00% 100.00% 100.00% 100.00% 98.93% 1.07% 100.00% 100.00% 70.10% 99.14% 0.86% 100.00% 100.00% 100.00% 100.00% 0.00% 100.00% 375 AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Enel Green Power Fontes dos Ventos 3 SA Enel Green Power Germany GmbH Enel Green Power Girgarre Holdings (Pty) Ltd Enel Green Power Global Investment BV Enel Green Power Guatemala SA Niterói Brazil 121,001,000.00 BRL Electricity generation and sale from renewable resources Line-by-line Munich Germany 25,000.00 EUR Electricity generation and sale Line-by-line Barangaroo, Sydney Australia 100.00 AUD Renewables Line-by-line Amsterdam Netherlands 10,000.00 EUR Holding Line-by-line Guatemala City Guatemala 10,000,000.00 GTQ Holding Line-by-line - Canada 1,000.00 CAD Holding Line-by-line Maroussi Greece 8,170,350.00 EUR Holding. Energy services Line-by-line Maroussi Greece 600,000.00 EUR Maroussi Greece 106,599,641.00 EUR Electricity generation, transport, sale and trading Line-by-line Electricity generation from renewable resources Line-by-line Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power SpA Enel Green Power Australia (Pty) Ltd Enel Green Power SpA Enel Green Power SpA Energía y Servicios South America SpA Enel Alberta Wind Inc. Enel Green Power Canada Inc. Enel Green Power SpA Enel Green Power Hellas SA Enel Green Power Hellas SA 100.00% 0.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% 1.00% 99.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Dover USA 1.00 USD Operator Wind Line-by-line Hilltopper Wind Holdings LLC 100.00% 100.00% Niterói Brazil 451,566,053.00 BRL Electricity generation from renewable resources Line-by-line Alba Energia Ltda Enel Green Power Brasil Participações Ltda 0.01% 99.99% 100.00% New Delhi India 100,000,000.00 INR Holding Line-by-line Enel Green Power Development Srl 100.00% 100.00% Line-by-line Enel SpA 100.00% 100.00% Rome Italy 10,000.00 EUR Niterói Brazil 199,552,644.00 BRL Niterói Brazil 219,235,933.00 BRL Niterói Brazil 407,279,143.00 BRL Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Line-by-line Niterói Brazil 135,459,530.00 BRL Wind plants Line-by-line Nairobi Kenya 100,000.00 KES Plant construction - Electricity generation from renewable resources Line-by-line Bondia Energia Ltda Enel Green Power Brasil Participações Ltda Bondia Energia Ltda Enel Green Power Brasil Participações Ltda Bondia Energia Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power RSA (Pty) Ltd Enel Green Power SpA 0.09% 99.91% 0.00% 100.00% 0.00% 100.00% 98.89% 1.11% 1.00% 99.00% 100.00% 100.00% 100.00% 100.00% 100.00% Enel Green Power Hadros Wind Limited Partnership Enel Green Power Hellas SA Enel Green Power Hellas Supply SA Enel Green Power Hellas Wind Parks South Evia SA Enel Green Power Hilltopper Wind LLC (formerly Hilltopper Wind Power LLC) Enel Green Power Horizonte Mp Solar SA Enel Green Power India Private Limited (formerly BLP Energy Private Limited) Enel Green Power Italia Srl Enel Green Power Ituverava Norte Solar SA Enel Green Power Ituverava Solar SA Enel Green Power Ituverava Sul Solar SA Enel Green Power Joana Eólica SA Enel Green Power Kenya Limited 376 Consolidated Annual Report 2019 Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Enel Green Power Lagedo Alto SA Enel Green Power Lagoa Participações SA (formerly Enel Green Power Projetos 45 SA) Enel Green Power Maniçoba Eólica SA Enel Green Power Metehara Solar Privrate Limited Company Enel Green Power México S de RL de Cv Enel Green Power Modelo I Eólica SA Enel Green Power Modelo II Eólica SA Enel Green Power Morocco SARLAU Enel Green Power Morro do Chapéu I Eólica SA Enel Green Power Morro do Chapéu II Eólica SA Enel Green Power Mourão SA Enel Green Power Namibia (Pty) Ltd Enel Green Power North America Development LLC Enel Green Power North America Inc. Enel Green Power O&M Solar LLC Enel Green Power Panamá Srl Enel Green Power Paranapanema SA Enel Green Power Partecipazioni Speciali Srl Niterói Brazil 1,000.00 BRL Electricity generation and sale from renewable resources Line-by-line Niterói Brazil 1,000.00 BRL Holding Line-by-line Niterói Brazil 90,722,530.00 BRL Electricity generation from renewable resources Line-by-line Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda 99.90% 0.10% 99.90% 0.10% 99.20% 0.80% 100.00% 100.00% 100.00% - Ethiopia 5,600,000.00 ETB Plant development, and construction Line-by-line Enel Green Power Solar Metehara SpA 80.00% 80.00% Mexico City Mexico 2,399,774,165.00 MXN Holding Line-by-line Niterói Brazil 132,642,000.00 BRL Niterói Brazil 117,142,000.00 BRL Casablanca Morocco 170,000,000.00 MAD Niterói Brazil 408,441,942.00 BRL Niterói Brazil 355,361,942.00 BRL Niterói Brazil 25,600,100.00 BRL Windhoek Namibia 10,000.00 NAD Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Plant development, design, construction and operation Line-by-line Line-by-line Line-by-line Line-by-line Line-by-line Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Enel Green Power SpA Energía y Servicios South America SpA Enel Green Power Brasil Participações Ltda Enel Green Power Brasil Participações Ltda Enel Green Power SpA Enel Green Power Brasil Participações Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Brasil Participações Ltda Enel Green Power SpA 100.00% 0.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Wilmington USA Andover Andover USA USA - - - USD USD Line-by-line Enel Green Power SpA 100.00% 100.00% Electricity generation, transport, sale and trading Line-by-line Enel North America Inc. 100.00% 100.00% USD Plant maintenance Line-by-line Enel Kansas LLC 100.00% 100.00% Panama City Panama 3,001.00 USD Holding Line-by-line Niterói Brazil 123,350,100.00 BRL Rome Italy 10,000.00 EUR Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Enel Green Power SpA Energía y Servicios South America SpA Enel Green Power Brasil Participações Ltda Enel Green Power SpA 99.97% 0.03% 100.00% 100.00% 100.00% 100.00% 100.00% 377 AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Enel Green Power Pau Ferro Eólica SA Enel Green Power Pedra do Gerônimo Eólica SA Enel Green Power Perú SAC Enel Green Power Primavera Eólica SA Enel Green Power Puglia Srl Enel Green Power RA SAE (in liquidation) Enel Green Power Rattlesnake Creek Wind Project LLC (formerly Rattlesnake Creek Wind Project LLC) Enel Green Power Roadrunner Solar Project Holdings LLC Enel Green Power Roadrunner Solar Project II LLC Enel Green Power Romania Srl Niterói Brazil 127,424,000.00 BRL Wind plants Line-by-line Niterói Brazil 189,519,527.57 BRL Wind plants Line-by-line San Miguel Perù 394,035,184.00 SOL Electricity generation from renewable resources Line-by-line Niterói Brazil 143,674,900.01 BRL Wind plants Line-by-line Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Pau Ferro Eólica SA Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power SpA Energía y Servicios South America SpA Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power SpA 98.79% 1.21% 98.90% 1.10% 100.00% 0.00% 99.00% 1.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Rome Italy 1,000,000.00 EUR Cairo Egypt 15,000,000.00 EGP Delaware USA 1.00 USD Andover USA - USD Electricity generation from renewable resources Design, decision, operation and maintenance of generation plants of all types and their distribution grids Electricity generation from renewable resources Holding. Electricity generation and distribution Line-by-line Line-by-line Enel Green Power Egypt SAE 100.00% 100.00% Line-by-line Rattlesnake Creek Holdings LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Dover USA 100.00 USD Renewables Line-by-line Roadrunner Solar Project Holdings LLC 100.00% 100.00% Bucharest Romania 2,430,631,000.00 RON Enel Green Power RSA (Pty) Ltd Gauteng Republic of South Africa 1,000.00 ZAR Enel Green Power RSA 2 (RF) (Pty) Ltd Gauteng Republic of South Africa 120.00 ZAR Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Enel Green Power Rus Limited Liability Company Moscow Russian Federation 60,500,000.00 RUB Renewables Line-by-line Line-by-line Enel Green Power SpA 100.00% 100.00% Line-by-line Enel Green Power Development Srl 100.00% 100.00% Line-by-line Enel Green Power RSA (Pty) Ltd Enel Green Power Partecipazioni Speciali Srl Enel Green Power SpA 100.00% 100.00% 1.00% 99.00% 100.00% Rome Italy 272,000,000 EUR Electricity generation from renewable resources Line-by-line Enel SpA 100.00% 100.00% Niterói Brazil 274,420,832.00 BRL Electricity generation and sale from renewable resources Line-by-line Enel Green Power Brasil Participações Ltda 100.00% 100.00% Rome Italy 750,000.00 EUR Electricity generation Line-by-line Enel Green Power SpA 100.00% 100.00% Enel Green Power SpA Enel Green Power Salto Apiacás SA (formerly Enel Green Power Damascena Eólica SA) Enel Green Power Sannio 378 Consolidated Annual Report 2019Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Enel Green Power São Abraão Eólica SA Enel Green Power São Gonçalo 07 SA (formerly Enel Green Power Projetos 42 SA) Enel Green Power São Gonçalo 08 SA (formerly Enel Green Power Projetos 43 SA) Enel Green Power São Gonçalo 1 SA (formerly Enel Green Power Projetos 10) Enel Green Power São Gonçalo 10 SA (formerly Enel Green Power Projetos 15) Enel Green Power São Gonçalo 11 SA (formerly Enel Green Power Projetos 44 SA) Enel Green Power São Gonçalo 12 SA (formerly Enel Green Power Projetos 22 SA) Enel Green Power São Gonçalo 13 SA Niterói Brazil 115,513,587.00 BRL Teresina Brazil 30,001,000.00 BRL Teresina Brazil 30,001,000.00 BRL Teresina Brazil 147,676,000.00 BRL Teresina Brazil 162,000,000.00 BRL Teresina Brazil 30,001,000.00 BRL Teresina Brazil 30,001,000.00 BRL Teresina Brazil 1,000.00 BRL Enel Green Power São Gonçalo 14 Teresina Brazil 1,000.00 BRL Enel Green Power São Gonçalo 15 Enel Green Power São Gonçalo 16 SA Enel Green Power São Gonçalo 17 SA Enel Green Power São Gonçalo 18 SA (formerly Enel Green Power Ventos de Santa Ângela 13 SA) Teresina Brazil 1,000.00 BRL Teresina Brazil 1,000.00 BRL Teresina Brazil 1,000.00 BRL Teresina Brazil 1,000.00 BRL Electricity generation from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Enel Green Power Brasil Participações Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Alba Energia Ltda Enel Green Power Brasil Participações Ltda Alba Energia Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Alba Energia Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Alba Energia Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda 100.00% 100.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 0.00% 100.00% 0.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 0.10% 99.90% 100.00% 99.89% 100.00% 0.11% 99.89% 100.00% 0.11% 0.10% 99.90% 100.00% 99.90% 100.00% 0.10% 99.90% 0.10% 100.00% 379 AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Teresina Brazil 1,000.00 BRL Teresina Brazil 162,676,000.00 BRL Teresina Brazil 1,000.00 BRL Teresina Brazil 162,000,000.00 BRL Teresina Brazil 162,000,000.00 BRL Teresina Brazil 142,676,000.00 BRL Teresina Brazil 162,676,000.00 BRL Teresina Brazil 162,676,000.00 BRL Teresina Brazil 14,976,000.00 BRL Teresina Brazil 1,000.00 BRL Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Niterói Brazil 1,000.00 BRL Holding Line-by-line Niterói Brazil 143,674,900.00 BRL Wind plants Line-by-line Wilmington USA 100.00 USD - Line-by-line Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Alba Energia Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Alba Energia Ltda Enel Green Power Brasil Participações Ltda Alba Energia Ltda Enel Green Power Brasil Participações Ltda Alba Energia Ltda Enel Green Power Brasil Participações Ltda Alba Energia Ltda Enel Green Power Brasil Participações Ltda Alba Energia Ltda Enel Green Power Brasil Participações Ltda Alba Energia Ltda Enel Green Power Brasil Participações Ltda Alba Energia Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel North America Inc. 99.90% 100.00% 0.10% 0.00% 100.00% 100.00% 99.90% 100.00% 0.10% 0.00% 100.00% 0.00% 100.00% 0.00% 100.00% 0.00% 100.00% 0.00% 100.00% 0.00% 100.00% 0.10% 99.90% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 99.90% 100.00% 0.10% 99.00% 100.00% 1.00% 100.00% 100.00% Cairo Egypt 15,000,000.00 EGP Singapore Singapore 1,300,000.00 SGD Rome Italy 10,000.00 EUR Design, decision, operation and maintenance of generation plants of all types and their distribution grids Electricity generation from renewable resources Plant development, design, construction and operation Line-by-line Enel Green Power Egypt SAE 100.00% 100.00% Line-by-line Enel Green Power SpA 100.00% 100.00% Line-by-line Enel Green Power SpA 100.00% 100.00% Enel Green Power São Gonçalo 19 SA Enel Green Power São Gonçalo 2 SA (formerly Enel Green Power Projetos 11) Enel Green Power São Gonçalo 20 SA Enel Green Power São Gonçalo 21 SA (formerly Enel Green Power Projetos 16) Enel Green Power São Gonçalo 22 SA (formerly Enel Green Power Projetos 30) Enel Green Power São Gonçalo 3 SA (formerly Enel Green Power Projetos 12) Enel Green Power São Gonçalo 4 SA (formerly Enel Green Power Projetos 13) Enel Green Power São Gonçalo 5 SA (formerly Enel Green Power Projetos 14) Enel Green Power São Gonçalo 6 SA (formerly Enel Green Power Projetos 19 SA) Enel Green Power São Gonçalo 9 SA Enel Green Power São Gonçalo Participações SA (formerly Enel Green Power Projetos 46 SA) Enel Green Power São Judas Eólica SA Enel Green Power Services LLC Enel Green Power Shu SAE (in liquidation) Enel Green Power Singapore Pte Ltd Enel Green Power Solar Energy Srl 380 Consolidated Annual Report 2019Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Enel Green Power Solar Metehara SpA Enel Green Power Solar Ngonye SpA (formerly Enel Green Power Africa Srl) Enel Green Power Tacaicó Eólica SA Enel Green Power Tefnut SAE (in liquidation) Enel Green Power Turkey Enerjí Yatirimlari Anoním Şírketí Enel Green Power Ventos de Santa Ângela 1 SA Enel Green Power Ventos de Santa Ângela 10 SA (formerly Enel Green Power Projetos 21) Enel Green Power Ventos de Santa Ângela 11 SA (formerly Enel Green Power Projetos 23) Enel Green Power Ventos de Santa Ângela 14 SA (formerly Enel Green Power Projetos 24) Enel Green Power Ventos de Santa Ângela 15 SA (formerly Enel Green Power Projetos 25) Enel Green Power Ventos de Santa Ângela 17 SA (formerly Enel Green Power Projetos 26) Enel Green Power Ventos de Santa Ângela 19 SA (formerly Enel Green Power Projetos 27) Enel Green Power Ventos de Santa Ângela 2 SA Rome Italy 50,000.00 EUR Electricity generation from renewable resources Line-by-line Enel Green Power SpA 100.00% 100.00% Rome Italy 50,000.00 EUR Electricity sale Line-by-line Niterói Brazil 91,634,360.00 BRL Electricity generation from renewable resources Line-by-line Enel Green Power SpA 100.00% 100.00% Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda 98.84% 100.00% 1.16% Cairo Egypt 15,000,000.00 EGP Istanbul Turkey 65,654,658.00 TRY Teresina Brazil 132,001,000.00 BRL Teresina Brazil 171,001,000.00 BRL Teresina Brazil 185,001,000.00 BRL Teresina Brazil 178,001,000.00 BRL Teresina Brazil 182,001,000.00 BRL Teresina Brazil 198,001,000.00 BRL Teresina Brazil 126,001,000.00 BRL Teresina Brazil 249,650,000.00 BRL Design, decision, operation and maintenance of generation plants of all types and their distribution grids Electricity generation from renewable resources Line-by-line Enel Green Power Egypt SAE 100.00% 100.00% Line-by-line Enel Green Power SpA 100.00% 100.00% Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Enel Green Power Brasil Participações Ltda Ventos de Santa Ângela Energias Renováveis SA Enel Green Power Brasil Participações Ltda Ventos de Santa Ângela Energias Renováveis SA Enel Green Power Brasil Participações Ltda Ventos de Santa Ângela Energias Renováveis SA Enel Green Power Brasil Participações Ltda Ventos de Santa Ângela Energias Renováveis SA Enel Green Power Brasil Participações Ltda Ventos de Santa Ângela Energias Renováveis SA Enel Green Power Brasil Participações Ltda Ventos de Santa Ângela Energias Renováveis SA Enel Green Power Brasil Participações Ltda Ventos de Santa Ângela Energias Renováveis SA Enel Green Power Brasil Participações Ltda Ventos de Santa Ângela Energias Renováveis SA 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 381 AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Teresina Brazil 126,001,000.00 BRL Teresina Brazil 113,001,000.00 BRL Teresina Brazil 132,001,000.00 BRL Teresina Brazil 132,001,000.00 BRL Teresina Brazil 132,001,000.00 BRL Teresina Brazil 132,001,000.00 BRL Teresina Brazil 106,001,000.00 BRL Teresina Brazil 132,001,000.00 BRL Teresina Brazil 185,001,000.00 BRL Teresina Brazil 105,001,000.00 BRL Teresina Brazil 105,001,000.00 BRL Teresina Brazil 105,001,000.00 BRL Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Enel Green Power Brasil Participações Ltda Ventos de Santa Ângela Energias Renováveis SA Enel Green Power Brasil Participações Ltda Ventos de Santa Ângela Energias Renováveis SA Enel Green Power Brasil Participações Ltda Ventos de Santa Ângela Energias Renováveis SA Enel Green Power Brasil Participações Ltda Ventos de Santa Ângela Energias Renováveis SA Enel Green Power Brasil Participações Ltda Ventos de Santa Ângela Energias Renováveis SA Enel Green Power Brasil Participações Ltda Ventos de Santa Ângela Energias Renováveis SA Enel Green Power Brasil Participações Ltda Ventos de Santa Esperança Energias Renováveis SA Enel Green Power Brasil Participações Ltda Ventos de Santa Ângela Energias Renováveis SA Enel Green Power Brasil Participações Ltda Ventos de Santa Ângela Energias Renováveis SA Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% Enel Green Power Ventos de Santa Ângela 20 SA (formerly Enel Green Power Projetos 28) Enel Green Power Ventos de Santa Ângela 21 SA (formerly Enel Green Power Projetos 29) Enel Green Power Ventos de Santa Ângela 3 SA (formerly Enel Green Power Projetos 4) Enel Green Power Ventos de Santa Ângela 4 SA (formerly Enel Green Power Projetos 6) Enel Green Power Ventos de Santa Ângela 5 SA (formerly Enel Green Power Projetos 7) Enel Green Power Ventos de Santa Ângela 6 SA (formerly Enel Green Power Projetos 8) Enel Green Power Ventos de Santa Ângela 7 SA (formerly Enel Green Power Projetos 9) Enel Green Power Ventos de Santa Ângela 8 SA (formerly Enel Green Power Projetos 18) Enel Green Power Ventos de Santa Ângela 9 SA (formerly Enel Green Power Projetos 20) Enel Green Power Ventos de Santa Ângela ACL 12 (formerly Enel Green Power Projetos 36) Enel Green Power Ventos de Santa Ângela ACL 13 SA (formerly Enel Green Power Projetos 17 SA) Enel Green Power Ventos de Santa Ângela ACL 16 SA (formerly Enel Green Power Projetos 38 SA) 382 Consolidated Annual Report 2019Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Enel Green Power Ventos de Santa Ângela ACL 18 SA (formerly Enel Green Power Projetos 47 SA) Enel Green Power Ventos de Santa Esperança 08 SA (formerly Enel Green Power Projetos 34 SA) Enel Green Power Ventos de Santa Esperança 1 SA (formerly Enel Green Power Fonte dos Ventos 1 SA) Enel Green Power Ventos de Santa Esperança 13 (formerly Enel Green Power Projetos 33 SA) Enel Green Power Ventos de Santa Esperança 15 SA Enel Green Power Ventos de Santa Esperança 16 SA (formerly Enel Green Power Projetos 35 SA) Enel Green Power Ventos de Santa Esperança 17 SA (formerly Enel Green Power Projetos 31 SA) Enel Green Power Ventos de Santa Esperança 21 SA (formerly Enel Green Power Projetos 37 SA) Enel Green Power Ventos de Santa Esperança 22 SA (formerly Enel Green Power Projetos 39 SA) Enel Green Power Ventos de Santa Esperança 25 SA (formerly Enel Green Power Projetos 40 SA) Enel Green Power Ventos de Santa Esperança 26 SA (formerly Enel Green Power Projetos 41 SA) Teresina Brazil 105,001,000.00 BRL Niterói Brazil 110,200,000.00 BRL Niterói Brazil 1,000.00 BRL Niterói Brazil 147,000,000.00 BRL Niterói Brazil 202,100,000.00 BRL Niterói Brazil 183,700,000.00 BRL Niterói Brazil 183,700,000.00 BRL Niterói Brazil 202,100,000.00 BRL Niterói Brazil 202,100,000.00 BRL Niterói Brazil 110,200,000.00 BRL Electricity generation and sale from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Niterói Brazil 202,100,000.00 BRL Electricity generation from renewable resources Line-by-line Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Ventos de Santa Esperança 26 SA (formerly Enel Green Power Projetos 41 SA) 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 99.90% 100.00% 0.10% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 0.00% 100.00% 383 AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Niterói Brazil 1,000.00 BRL Electricity generation from renewable resources Line-by-line Niterói Brazil 1,000.00 BRL Holding Line-by-line Teresina Brazil 138,001,000.00 BRL Teresina Brazil 138,001,000.00 BRL Teresina Brazil 138,001,000.00 BRL Teresina Brazil 138,001,000.00 BRL Teresina Brazil 138,001,000.00 BRL Teresina Brazil 1,000.00 BRL Teresina Brazil 138,001,000.00 BRL Teresina Brazil 138,001,000.00 BRL Teresina Brazil 1,000.00 BRL Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda 99.90% 0.10% 100.00% 99.90% 100.00% 0.10% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 99.90% 100.00% 0.10% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 99.90% 100.00% 0.10% Enel Green Power Ventos de Santa Esperança 3 SA Enel Green Power Ventos de Santa Esperança Participações SA (formerly Enel Green Power Cumaru 06 SA) Enel Green Power Ventos de São Roque 01 SA Enel Green Power Ventos de São Roque 02 SA Enel Green Power Ventos de São Roque 04 SA Enel Green Power Ventos de São Roque 08 SA Enel Green Power Ventos de São Roque 11 SA Enel Green Power Ventos de São Roque 13 SA Enel Green Power Ventos de São Roque 16 SA Enel Green Power Ventos de São Roque 17 SA Enel Green Power Ventos de São Roque 18 SA 384 Consolidated Annual Report 2019Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Enel Green Power Ventos de São Roque 19 SA Enel Green Power Ventos de São Roque 22 SA Enel Green Power Ventos de São Roque 26 SA Enel Green Power Ventos de São Roque 29 SA Enel Green Power Villoresi Srl Enel Green Power Volta Grande SA (formerly Enel Green Power Projetos 1 SA) Enel Green Power Zambia Limited Enel Green Power Zeus II - Delfina 8 SA Teresina Brazil 1,000.00 BRL Teresina Brazil 1,000.00 BRL Teresina Brazil 1,000.00 BRL Teresina Brazil 1,000.00 BRL Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Rome Italy 1,200,000.00 EUR Niterói Brazil 565,756,528.00 BRL Electricity generation from renewable resources Electricity generation and sale from renewable resources Line-by-line Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power SpA 99.90% 100.00% 0.10% 99.90% 100.00% 0.10% 99.90% 100.00% 0.10% 99.90% 0.10% 100.00% 51.00% 51.00% Line-by-line Enel Brasil SA 100.00% 57.26% Lusaka Zambia 15,000.00 ZMW Electricity sale Line-by-line Niterói Brazil 140,001,000.00 BRL Electricity generation from renewable resources Line-by-line Enel Green Power Development Srl Enel Green Power RSA (Pty) Ltd Enel Green Power Brasil Participações Ltda 1.00% 99.00% 100.00% 100.00% 100.00% Enel Holding Finance Srl Rome Enel Iberia SLU Madrid Italy Spain 10,000.00 EUR Holding Line-by-line Enel SpA 100.00% 100.00% 336,142,500.00 EUR Holding Line-by-line Enel SpA 100.00% 100.00% Enel Innovation Hubs Srl Rome Italy 1,100,000.00 EUR Civil and mechanical engineering, water systems Line-by-line Enel SpA 100.00% 100.00% Enel Insurance NV Amsterdam Netherlands 60,000.00 EUR Reassurance Line-by-line Enel SpA 100.00% 100.00% Enel Investment Holding BV Amsterdam Netherlands 1,000,000.00 EUR Holding Line-by-line Enel SpA 100.00% 100.00% Enel Italia SpA Rome Italy 50,100,000.00 EUR Enel Kansas LLC Wilmington USA Enel Minnesota Holdings LLC Minneapolis USA Enel Nevkan Inc. Wilmington USA - - - USD USD USD Personnel administration activities, information technology, real estate and business services Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Enel SpA 100.00% 100.00% Line-by-line Enel North America Inc. 100.00% 100.00% Line-by-line EGP Geronimo Holding Company Inc. 100.00% 100.00% Line-by-line Enel North America Inc. 100.00% 100.00% Enel Green Power SpA Enel Green Power Canada Inc. 100.00% 100.00% 100.00% 100.00% Enel North America Inc. Enel Operations Canada Ltd Andover USA 50.00 USD Line-by-line Calgary Canada 1,000.00 CAD - Line-by-line Enel Perú SAC San Miguel Enel Produzione SpA Rome Peru Italy 5,361,789,105.00 1,800,000,000.00 SOL EUR Holding Line-by-line Enel Américas SA 100.00% 57.26% Electricity sale Line-by-line Enel SpA 100.00% 100.00% 385 AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Enel Rinnovabile SA de Cv Enel Roadrunner Solar Project Holdings LLC Mexico City Mexico 100.00 MXN Electricity generation Line-by-line Dover USA 100.00 USD Renewables Line-by-line Enel Green Power Global Investment BV Hidroelectricidad del Pacífico S de RL de Cv Enel Green Power Roadrunner Solar Project Holdings LLC 99.00% 100.00% 1.00% 100.00% 100.00% Enel Romania SA Buftea Romania 200,000.00 RON Business services Line-by-line Enel SpA 100.00% 100.00% Enel Rus Wind Azov LLC Enel Rus Wind Generation LLC Enel Rus Wind Kola LLC Moscow Moscow Murmansk City Enel Russia PJSC Yekaterinburg Russian Federation Russian Federation Russian Federation Russian Federation 200,000,000.00 RUB Renewables Line-by-line Enel Russia PJSC 100.00% 56.43% 350,000.00 RUB Energy services Line-by-line Enel Russia PJSC 100.00% 56.43% 10,000.00 RUB Renewables Line-by-line Enel Russia PJSC 100.00% 56.43% 35,371,898,370.00 RUB Electricity sale Line-by-line Enel SpA 56.43% 56.43% Enel Salt Wells LLC Fallon USA - USD Enel Saudi Arabia Limited Al Khobar Saudi Arabia 1,000,000.00 SAR Electricity generation from renewable resources Management of activities associated with participation in tenders called by the SEC for the development of smart metering and grid automation Line-by-line Enel Geothermal LLC 100.00% 100.00% Line-by-line e-distribuzione SpA 60.00% 60.00% Enel Servicii Comune SA Bucharest Romania 33,000,000.00 RON Energy services Line-by-line Enel Solar Srl Panama City Panama 10,100.00 USD Enel Sole Srl Rome Italy 4,600,000.00 EUR Electricity generation from renewable resources Public lighting systems and services Line-by-line Line-by-line Enel X Srl 100.00% 100.00% Enel Soluções Energéticas Ltda Niterói Brazil 42,863,000.00 BRL Electricity generation from renewable resources Line-by-line Enel Stillwater LLC Wilmington USA Line-by-line - - USD USD Electricity generation from renewable resources Electricity generation from renewable resources Wilmington USA Niterói Brazil 10,000.00 BRL Enel Texkan Inc. Wilmington USA 100.00 USD Zagreb Croatia 2,240,000.00 HRK Line-by-line Enel North America Inc. 100.00% 100.00% Electricity generation, transmission, distribution, purchase and sale Line-by-line Enel Brasil SA 100.00% 57.26% Electricity generation from renewable resources Electricity trading Line-by-line Chi Power Inc. 100.00% 100.00% Line-by-line Enel Global Trading SpA 100.00% 100.00% Bucharest Romania 21,250,000.00 RON Electricity sourcing and trading Line-by-line Enel Energie Muntenia SA 100.00% 78.00% Beograd Serbia 300,000.00 Buenos Aires Argentina 14,011,100.00 EUR ARS Electricity trading Electricity trading Line-by-line Line-by-line Enel Global Trading SpA Enel Américas SA Enel Argentina SA 100.00% 100.00% 55.00% 45.00% 57.26% Niterói Brazil 1,000,000.00 BRL Electricity generation, transmission, distribution, purchase and sale Line-by-line Enel Brasil SA 100.00% 57.26% Enel Surprise Valley LLC Enel Tecnologia de Redes SA Enel Trade doo in liquidation Enel Trade Romania Srl Enel Trade Serbia doo Enel Trading Argentina Srl Enel Trading Brasil SA 386 E-Distribuţie Banat SA E-Distribuţie Dobrogea SA Enel Green Power Panamá Srl Energía y Servicios South America SpA 50.00% 50.00% 99.01% 0.99% 51.00% 100.00% Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Soluções Energéticas Ltda Enel Geothermal LLC 100.00% 0.00% 100.00% 100.00% 100.00% Consolidated Annual Report 2019Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Enel Trading North America LLC Enel X Argentina SAU Enel X Australia Holding (Pty) Ltd Enel X Australia (Pty) Ltd Enel X Battery Storage Limited Partnership Enel X Brasil Gerenciamento de Energia Ltda Wilmington USA 10,000,000.00 USD Trading Line-by-line Buenos Aires Argentina 127,800,000.00 ARS Marketing and energy- related services Line-by-line Melbourne Australia 2,324,698.00 AUD Renewable energy Line-by-line Melbourne Australia 9,880.00 AUD Renewable energy Line-by-line Vancouver Canada 10,000.00 CAD - Line-by-line Sorocaba Brazil 117,240.00 BRL Renewable energy Line-by-line Enel X Brasil SA Niterói Brazil 97,313,600.00 BRL Electricity Line-by-line Enel North America Inc. Enel X International Srl Enel X International Srl Energy Response Holdings (Pty) Ltd Enel X Canada Holding Inc. Enel X Canada Ltd Enel X Ireland Limited EnerNOC Uk II Limited Central Geradora Termelétrica Fortaleza SA Enel Brasil SA 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.01% 99.99% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 57.26% Enel X Canada Holding Inc. Vancouver Canada 1,000.00 CAD Holding Line-by-line Enel X Canada Ltd 100.00% 100.00% Enel X Canada Ltd Mississauga Canada 1,000.00 CAD Renewable energy Line-by-line Enel X International Srl 100.00% 100.00% Enel X Chile SpA Santiago Enel X College Ave. Project LLC Boston Chile USA 3,800,000,000.00 CLP Services Line-by-line Enel Chile SA 100.00% 61.93% - USD Holding Line-by-line Enel X MA Holdings LLC 100.00% 100.00% Bogotá Colombia 5,000,000,000.00 COP Installation, maintenance and repair of electronic plant Line-by-line Codensa SA ESP 100.00% 27.66% Shanghai China 3,500,000.00 USD Electric mobility Line-by-line 5,000.00 USD Renewable energy Line-by-line 100.00 USD Holding Line-by-line 1,000,000.00 EUR Services Line-by-line Enel X Srl 100.00% 100.00% Enel X France SAS Paris France 1,000.00 EUR - Line-by-line - USD Holding Line-by-line Enel X Colombia SAS Enel X Energy (Shanghai) Co. Ltd Enel X Federal LLC Lutherville Enel X Finance Partner LLC Enel X Financial Services Srl Lutherville Rome USA USA Italy USA Italy Enel X Hayden Rowe St. Project LLC Enel X International Srl Enel X Ireland Limited Enel X Italia SpA Enel X Japan K.K. Boston Rome Dublin Rome Tokyo 100,000.00 EUR Holding Line-by-line Enel X Srl 100.00% 100.00% Ireland 100,000.00 EUR Renewable energy Line-by-line Enel X International Srl 100.00% 100.00% Italy 200,000.00 EUR Energy services Line-by-line Enel X Srl 100.00% 100.00% Japan 165,000,000.00 JPY Renewable energy Line-by-line Enel X Korea Limited Seoul Korea del Sud 1,200,000,000.00 KRW Renewable energy Line-by-line Enel X MA Holdings LLC Enel X Mobility Romania Srl Lutherville USA 100.00 USD Holding Line-by-line Bucharest Romania 937,800.00 RON Energy services Line-by-line Enel X Mobility Srl Rome Enel X Morrissey Blvd. Project LLC Lutherville Italy USA 100.00 USD Holding Line-by-line Enel X New Zealand Limited Enel X North America Inc. Wellington New Zealand 313,606.00 AUD Renewable energy Line-by-line Lutherville USA 1,000.00 USD Renewable energy Line-by-line 100,000.00 EUR Electric mobility Line-by-line Enel X Srl 100.00% 100.00% Enel X International Srl 100.00% 100.00% Enel X North America Inc. Enel X North America Inc. 100.00% 100.00% 100.00% 100.00% Enel X International Srl Enel X Finance Partner LLC 100.00% 100.00% 100.00% 100.00% Enel X International Srl Enel X International Srl Enel X Finance Partner LLC 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Enel X International Srl Enel X Srl 99.00% 1.00% 100.00% Enel X Finance Partner LLC 100.00% 100.00% Energy Response Holdings (Pty) Ltd Enel X International Srl 100.00% 100.00% 100.00% 100.00% 387 Attachments Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Enel X Norway AS Porsgrunn Norway 1,000,000.00 NOK Services Line-by-line Enel X International Srl 100.00% 100.00% Enel X Perú SAC San Miguel Peru 3,005,000.00 SOL Electric mobility Line-by-line Enel Perú SAC 100.00% 57.26% Enel X Polska Sp. Zo.O. Warsaw Poland 5,000.00 PLN Renewable energy Line-by-line Enel X Romania Srl Bucharest Romania 234,450.00 RON Energy services Line-by-line Enel X Rus LLC Moscow Russian Federation 8,000,000.00 RUB - Line-by-line Enel X Ireland Limited Enel X International Srl Enel X Srl Enel X International Srl 100.00% 100.00% 99.00% 1.00% 100.00% 99.00% 99.00% Enel X Srl Rome Italy 1,050,000.00 EUR Holding. Energy services Line-by-line Enel SpA 100.00% 100.00% Enel X Services India Private Limited Enel X Singapore Pte Ltd Enel X Taiwan Co. Ltd Mumbai City India 45,000.00 INR Engineering and consulting services Line-by-line Singapore Singapore 199,999.00 EUR Energy services Line-by-line Taipei City Taiwan 65,000,000.00 TWD Renewable energy Line-by-line Enel X Uk Limited London United Kingdom 10,001.00 GBP Renewable energy Line-by-line Enel X International Srl Enel X North America Inc. Enel X International Srl Enel X Ireland Limited Enel X International Srl 100.00% 0.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Enel.si Srl Rome Italy 5,000,000.00 EUR Enelco SA Maroussi Greece 60,108.80 EUR Riyadh Saudi Arabia 5,000,000.00 SAR Plant engineering and energy services Plant construction, operation and maintenance Plant construction, operation and maintenance Line-by-line Enel X Srl 100.00% 100.00% Line-by-line Enel Investment Holding BV 75.00% 75.00% Line-by-line Enelpower SpA 51.00% 51.00% Niterói Brazil 5,068,000.00 BRL Electrical engineering Line-by-line Enel Green Power Brasil Participações Ltda Energía y Servicios South America SpA 100.00% 0.00% 100.00% Enelpower SpA Milan Italy 2,000,000.00 EUR Design, development and maintenance of engineering plants Line-by-line Enel SpA 100.00% 100.00% San Miguel Peru 6,463,000.00 SOL Electricity generation from renewable resources Line-by-line Ceuta Spain 65,000.00 EUR Electricity supply Line-by-line Tarragona Spain - EUR Electricity generation and supply Line-by-line Madrid Spain 3,300.00 EUR Renewable Line-by-line Enel Green Perú SAC Enel Green Power Perú SAC Energía y Servicios South America SpA Empresa de Alumbrado Eléctrico de Ceuta SA Endesa Red SA (Sociedad Unipersonal) Enel Green Power España SL Enel Green Power SpA 0.01% 99.99% 99.99% 0.00% 100.00% 67.50% 100.00% 70.10% 100.00% 70.10% 100.00% 100.00% Rome Italy 4,840,000.00 EUR Mexico City Mexico 50,000.00 MXN San José Costa Rica 10,000.00 CRC Mexico City Mexico 33,452,769.00 MXN Mexico City Mexico 673,583,489.00 MXN Line-by-line Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Enel Green Power SpA 99.00% 99.00% Marketing and electricity- related services Line-by-line Enel Green Power Costa Rica SA 100.00% 100.00% Electricity generation from renewable resources Electricity generation from renewable resources Equity Equity Tenedora de Energía Renovable Sol y Viento SAPI de Cv Tenedora de Energía Renovable Sol y Viento SAPI de Cv 60.80% 20.00% 60.80% 20.00% Enelpower Contractor And Development Saudi Arabia Ltd Enelpower do Brasil Ltda Energética Monzón SAC Energía Ceuta XXI Comercializadora De Referencia SA Energía Eléctrica del Ebro SA (Sociedad Unipersonal) Energia Eólica Alto del Llano SLU Energia Eolica Srl - EN.EO. Srl Energía Global de México (Enermex) SA de Cv Energía Global Operaciones Srl Energía Limpia de Amistad SA de Cv Energía Limpia de Palo Alto SA de Cv 388 Consolidated Annual Report 2019 Company name Headquarters Country Share capital Currency Activity Energía Limpia de Puerto Libertad S de RL de Cv Mexico City Mexico 2,953,980.00 MXN Energía Marina SpA Santiago Chile 2,404,240,000.00 CLP Energía Neta Sa Caseta Llucmajor SL (Sociedad Unipersonal) Palma de Mallorca Spain 9,000.00 EUR Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Consolidation method Held by % holding Group % holding Line-by-line Equity Enel Green Power México S de RL de Cv Enel Rinnovabile SA de Cv Enel Green Power Chile Ltda 0.01% 99.99% 100.00% 25.00% 15.48% Line-by-line Enel Green Power España SL 100.00% 70.10% Energías de Aragón I SL Energías de Graus SL Zaragoza Spain 3,200,000.00 EUR Electricity transmission, distribution and sale Line-by-line Barcelona Spain 1,298,160.00 EUR Hydroelectric plants Line-by-line Energía Nueva de Iguu S de RL de Cv Energía Nueva Energía Limpia México S de RL de Cv Energía XXI Comercializadora de Referencia SL Energía y Servicios South America SpA Mexico City Mexico 51,879,307.00 MXN Mexico City Mexico 5,339,650.00 MXN Madrid Spain 2,000,000.00 EUR Santiago Chile 142,091,084.73 USD Energías Alternativas del Sur SL Las Palmas de Gran Canaria Spain 546,919.10 EUR Energías Especiales de Careón SA Santiago de Compostela Spain 270,450.00 EUR Energías Especiales de Peña Armada SA Energías Especiales del Alto Ulla SA Energías Especiales del Bierzo SA Madrid Spain 963,300.00 EUR Madrid Spain 19,594,860.00 EUR Torre del Bierzo Spain 1,635,000.00 EUR Energías Renovables La Mata SA de Cv Energie Electrique de Tahaddart SA Mexico City Mexico 656,615,400.00 MXN Marrakech Morocco 750,400,000.00 MAD Energotel AS Bratislava Slovakia 2,191,200.00 Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Enel Green Power México S de RL de Cv Energía Nueva Energía Limpia México S de RL de Cv Enel Green Power Guatemala SA Enel Green Power SpA 99.90% 99.91% 0.01% 0.04% 99.96% 100.00% Marketing and electricity- related services Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Endesa Energía SA 100.00% 70.10% Line-by-line Enel Green Power SpA 100.00% 100.00% Line-by-line Line-by-line Enel Green Power España SL Endesa Red SA (Sociedad Unipersonal) Enel Green Power España SL Enel Green Power España SL 54.95% 38.52% 100.00% 70.10% 66.67% 46.73% 77.00% 53.98% Line-by-line Enel Green Power España SL 80.00% 56.08% Line-by-line Enel Green Power España SL 100.00% 70.10% Equity Line-by-line Enel Green Power España SL Enel Green Power México S de RL de Cv Energía Nueva de Iguu S de RL de Cv Endesa Generación SA Slovenské elektrárne AS 50.00% 35.05% 99.00% 1.00% 100.00% 32.00% 22.43% 20.00% 6.60% Combined-cycle generation plants Equity Operation of optical fiber network Equity EUR EUR ENergy Hydro Piave Srl in liquidation Energy Response Holdings (Pty) Ltd Energy Storage Resources LLC Belluno Italy 800,000.00 Electricity purchasing and sale Line-by-line Enel Produzione SpA 51.00% 51.00% Melbourne Australia 630,451.00 AUD Renewable energy Line-by-line Houston USA 10.00 USD Holding Equity Enel X Australia Holding (Pty) Ltd Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) 100.00% 100.00% 10.00% 10.00% 389 AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Enerlive Srl Rome Italy 6,520,000.00 EUR Electricity generation from renewable resources Line-by-line Maicor Wind Srl 100.00% 100.00% EnerNOC GmbH Munich Germany 25,000.00 EUR Renewable energy Line-by-line Dublin Ireland 100,000.00 EUR Renewable energy Line-by-line London United Kingdom 21,000.00 GBP Renewable energy Line-by-line Enel X Uk Limited 100.00% 100.00% EnerNOC Ireland Limited EnerNOC Uk II Limited Entech (China) Information Technology Co. Ltd Entech Utility Service Bureau Inc. Envatios Promoción I SLU Envatios Promoción II SLU Envatios Promoción III SLU Envatios Promoción XX SLU Eólica del Cierzo SLU Eólica del Principado SAU Eólica Valle del Ebro SA Eólicas de la Patagonia SA Eólicas de Lanzarote SL Eolo Energie Corleone Campofiorito Srl EPM Eólica Dolores SA de Cv Shenzhen China 1,500.00 EUR Renewable energy Equity Lutherville USA 1,500.00 USD Renewable energy Line-by-line Seville Seville Seville Seville Zaragoza Spain Spain Spain Spain Spain 3,000.00 EUR Photovoltaic systems Line-by-line 3,000.00 EUR Photovoltaic systems Line-by-line 3,000.00 EUR Photovoltaic systems Line-by-line 3,000.00 EUR Photovoltaic systems Line-by-line 225,000.00 EUR Renewable energy Line-by-line Gijón - Asturias Spain 60,000.00 EUR Zaragoza Spain 3,561,342.50 EUR Eólica Zopiloapan SA de Cv Mexico City Mexico 1,877,201.54 MXN Eólicas de Agaete SL Las Palmas de Gran Canaria Eólicas de Fuencaliente SA Las Palmas de Gran Canaria Eólicas de Fuerteventura AIE Puerto del Rosario Spain 240,400.00 EUR Spain 216,360.00 EUR Spain - EUR Enel X North America Inc. Enel X Ireland Limited 100.00% 100.00% 100.00% 100.00% EnerNOC Uk II Limited Enel X North America Inc. Enel Green Power España SL Enel Green Power España SL Enel Green Power España SL Enel Green Power España SL Enel Green Power España SL Enel Green Power España SL Enel Green Power España SL Enel Green Power México S de RL de Cv Enel Green Power Partecipazioni Speciali Srl Enel Green Power España SL 50.00% 50.00% 100.00% 100.00% 100.00% 70.10% 100.00% 70.10% 100.00% 70.10% 100.00% 70.10% 100.00% 70.10% 100.00% 70.10% 50.50% 35.40% 56.98% 96.48% 39.50% 80.00% 56.08% Enel Green Power España SL Enel Green Power España SL Enel Green Power España SL Enel Green Power España SL 40.00% 28.04% 50.00% 35.05% 40.00% 28.04% 50.00% 35.05% Enel Green Power SpA Enel Rinnovabile SA de Cv Hidroelectricidad del Pacífico S de RL de Cv Endesa Red SA (Sociedad Unipersonal) 100.00% 100.00% 99.00% 1.00% 100.00% 50.00% 35.05% Line-by-line Enel Green Power España SL 55.00% 38.56% Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Electricity generation from renewable resources Line-by-line Line-by-line Equity Equity Equity Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Buenos Aires Argentina 480,930.00 ARS Las Palmas de Gran Canaria Spain 1,758,000.00 EUR Electricity generation and distribution Equity Eólicas de Tenerife AIE Santa Cruz de Tenerife Eólicas de Tirajana SL Las Palmas de Gran Canaria Spain 420,708.40 EUR Spain 3,000.00 EUR Line-by-line Enel Green Power España SL 60.00% 42.06% Rome Italy 10,000.00 EUR Line-by-line Mexico City Mexico 100.00 MXN Electricity generation, transmission, distribution sale and purchase Line-by-line Empresa Energía SA Cadiz Spain 2,500,000.00 EUR Electricity supply Equity 390 Consolidated Annual Report 2019European Energy Exchange AG Explotaciones Eólicas de Escucha SA Explotaciones Eólicas El Puerto SA Explotaciones Eólicas Santo Domingo de Luna SA Explotaciones Eólicas Saso Plano SA Explotaciones Eólicas Sierra Costera SA Explotaciones Eólicas Sierra La Virgen SA Fenner Wind Holdings LLC Fótons de Santo Anchieta Energias Renováveis SA Fotovoltaica Yunclillos SLU Fourmile Wind Project LLC Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Essex Company LLC Boston USA - USD Electricity generation from renewable resources Equity Leipzig Germany 40,050,000.00 EUR Commodity trading - Zaragoza Spain 3,505,000.00 EUR Teruel Spain 3,230,000.00 EUR Zaragoza Spain 100,000.00 EUR Zaragoza Spain 5,488,500.00 EUR Zaragoza Spain 8,046,800.00 EUR Zaragoza Spain 4,200,000.00 EUR Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources EGPNA REP Hydro Holdings LLC Enel Global Trading SpA Enel Green Power España SL 100.00% 50.00% 2.33% 2.33% 70.00% 49.07% Line-by-line Line-by-line Enel Green Power España SL 73.60% 51.59% Line-by-line Enel Green Power España SL 51.00% 35.75% Line-by-line Enel Green Power España SL 65.00% 45.57% Line-by-line Enel Green Power España SL 90.00% 63.09% Line-by-line Enel Green Power España SL 90.00% 63.09% Dover Finsec Lab Ltd Tel Aviv Flagpay Srl Milan USA Israel Italy 100.00 100.00 USD Holding Line-by-line Enel Kansas LLC 100.00% 100.00% ILS Any legal activity Equity Enel X Srl 30.00% 30.00% 10,000.00 EUR Services Line-by-line PayTipper SpA 100.00% 55.00% Flat Rock Wind Project LLC Andover USA Florence Hills LLC Minneapolis USA 1.00 - USD USD Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% Electricity generation and sale from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Maracanaú Brazil 577,000.00 BRL Line-by-line Granada Spain 3,000.00 EUR Photovoltaic plants Line-by-line Andover USA 1.00 Fowler Hydro LLC Wilmington USA Freedom Energy Storage LLC Andover USA - - USD USD USD Electricity generation and sale from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Electricity generation from renewable resources Line-by-line Front Marítim del Besòs SL Barcelona Spain 9,000.00 EUR Real estate Fulcrum LLC Wilmington USA - USD Furatena Solar 1 SLU Seville Spain 3,000.00 EUR Galaxy Wind Project LLC Andover USA 1.00 USD Garob Wind Farm (RF) (Pty) Ltd Gauteng Republic of South Africa 100.00 ZAR Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation and sale from renewable resources Electricity generation and sale from renewable resources Equity Equity Line-by-line Gas y Electricidad Generación SAU Palma de Mallorca Spain 213,775,700.00 EUR Electricity sale Line-by-line Enel Green Power Brasil Participações Ltda Enel Green Power España SL Tradewind Energy Inc. Enel North America Inc. Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) Endesa Generación SA EGPNA REP Hydro Holdings LLC 100.00% 100.00% 100.00% 70.10% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 61.37% 43.02% 100.00% 50.00% Line-by-line Enel Green Power España SL 100.00% 70.10% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Enel Green Power RSA 2 (RF) (Pty) Ltd Endesa Generación SA 60.00% 60.00% 100.00% 70.10% 391 AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Gasoducto Atacama Argentina SA Sucursal Argentina Buenos Aires Argentina Gauley Hydro LLC Wilmington USA Gauley River Management LLC Willison USA Gauley River Power Partners LLC Summersville USA - - 1.00 - ARS Natural gas transport Line-by-line Enel Generación Chile SA 100.00% 57.93% USD USD USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Equity Line-by-line Enel North America Inc. 100.00% 100.00% Line-by-line Enel North America Inc. 100.00% 100.00% Genability Inc. San Francisco USA 6,010,074.72 USD Energy services Equity Generadora de Occidente Ltda Generadora Eólica Alto Pacora Srl Generadora Montecristo SA Generadora Solar Tolé Srl Geotérmica del Norte SA Guatemala City Guatemala 16,261,697.33 GTQ Panama City Panama 10,100.00 USD Guatemala City Guatemala 3,820,000.00 GTQ Panama City Panama 10,100.00 USD Santiago Chile 326,577,419,702.00 CLP Gibson Bay Wind Farm (RF) (Pty) Ltd Gauteng Republic of South Africa 1,000.00 ZAR Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Line-by-line Line-by-line Line-by-line Line-by-line Girgarre Solar Farm (Pty) Ltd Barangaroo, Sydney Australia - AUD Renewables Line-by-line Global Coal Limited London United Kingdom 4,042,375.00 Globyte SA San José Costa Rica 900,000.00 GBP CRC Coal trading and related activities Marketing and electricity- related services - - Gnl Chile SA Santiago Chile 3,026,160.00 USD Design and LNG supply Equity Goldcup 18936 AB Stockholm Sweden 50,000.00 SEK Services Line-by-line Goodwell Wind Project LLC Goodyear Lake Hydro LLC Wilmington USA Wilmington USA - - USD USD Electricity generation from renewable resources Electricity generation from renewable resources Equity Line-by-line Gorona del Viento El Hierro SA Santa Cruz de Tenerife Spain 30,936,736.00 EUR Development and maintenance of El Hierro generation plant Equity EGPNA REP Hydro Holdings LLC Enel X North America Inc. Enel Green Power Guatemala SA Enel Green Power SpA Enel Green Power Panamá Srl Energía y Servicios South America SpA Enel Green Power Guatemala SA Enel Green Power SpA Enel Green Power Panamá Srl Energía y Servicios South America SpA Enel Green Power Chile Ltda Enel Green Power RSA (Pty) Ltd Enel Green Power Girgarre Holdings (Pty) Ltd Enel Global Trading SpA Enel Green Power Costa Rica SA Enel Generación Chile SA Enel X International Srl Origin Goodwell Holdings LLC Enel North America Inc. Unión Eléctrica de Canarias Generación SAU 100.00% 50.00% 50.00% 50.00% 1.00% 99.00% 99.01% 0.99% 0.01% 99.99% 99.01% 0.99% 100.00% 100.00% 100.00% 100.00% 84.59% 52.39% 60.00% 60.00% 100.00% 100.00% 4.68% 4.68% 10.00% 10.00% 33.33% 19.31% 100.00% 100.00% 100.00% 20.00% 100.00% 100.00% 23.21% 16.27% Andover USA - USD Seville Spain 3,006.00 EUR Andover USA 1.00 USD Bucharest Romania 1,145,400.00 RON Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Endesa Generación II SA 100.00% 70.10% Electricity generation and sale from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Tradewind Energy Inc. Enel Green Power Romania Srl Enel Green Power SpA 100.00% 100.00% 100.00% 0.00% 100.00% Grand Prairie Solar Project LLC Guadarranque Solar 4 SL Unipersonal Gusty Hill Wind Project LLC GV Energie Rigenerabili ITAL- RO Srl 392 Consolidated Annual Report 2019Haystack Wind Project LLC Heartland Farms Wind Project LLC Helio Atacama Cinco SpA Hidroeléctrica de Catalunya SL Hidroeléctrica de Ourol SL Hidroelectricidad del Pacífico S de RL de Cv Hidromondego - Hidroeléctrica do Mondego Lda High Lonesome Storage LLC High Lonesome Wind Holdings LLC High Lonesome Wind Power LLC Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Hadley Ridge LLC Minneapolis USA Hamilton County Solar Project LLC Andover USA Harvest Ridge Wind Project LLC Andover USA Hastings Solar LLC Wilmington USA - 1.00 1.00 - USD USD USD USD Electricity generation from renewable resources Electricity generation and sale from renewable resources Electricity generation and sale from renewable resources Electricity generation from renewable resources Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Aurora Distributed Solar LLC 100.00% 51.00% Hatch Data Inc. San Francisco USA 10,000.00 USD Any legal activity - Enel X North America Inc. 5.00% 5.00% Andover USA Wilmington USA 1.00 1.00 USD Electricity generation and sale from renewable resources Line-by-line Tradewind Energy Inc. 100.00% 100.00% USD - Line-by-line Enel Kansas LLC 100.00% 100.00% Santiago Chile 1,000,000.00 CLP Electricity generation, trading and transmission Line-by-line Enel Green Power del Sur SpA 100.00% 61.93% Barcelona Spain 126,210.00 EUR Lugo Spain 1,608,200.00 EUR Colima Mexico 30,890,736.00 MXN Electricity transmission and distribution Line-by-line Electricity generation from renewable resources Electricity generation from renewable resources Electricity distribution and sale Equity Line-by-line Line-by-line Hidroflamicell SL Barcelona Spain 78,120.00 EUR Hidroinvest SA Buenos Aires Argentina 55,312,093.00 ARS Holding Line-by-line Lisbon Portugal 3,000.00 EUR Hydroelectric power Line-by-line Endesa Red SA (Sociedad Unipersonal) Enel Green Power España SL Enel Green Power México S de RL de Cv Hidroeléctrica de Catalunya SL Enel Américas SA Enel Argentina SA Endesa Generación Portugal SA Endesa Generación SA 100.00% 70.10% 30.00% 21.03% 99.99% 99.99% 75.00% 52.58% 41.94% 54.76% 10.00% 90.00% 55.37% 70.10% Andover Wilmington Boston USA USA USA 100.00 100.00 1.00 USD Holding. Electricity sale Line-by-line Enel Kansas LLC 100.00% 100.00% USD Holding Line-by-line Enel Kansas LLC 100.00% 100.00% High Shoals LLC Wilmington USA - USD Electricity generation from renewable resources Equity High Street Corporation (Pty) Ltd Melbourne Australia 2.00 AUD Renewable energy Line-by-line USD Renewable energy Line-by-line High Lonesome Wind Holdings LLC EGPNA REP Hydro Holdings LLC 100.00% 100.00% 100.00% 50.00% Energy Response Holdings (Pty) Ltd 100.00% 100.00% Highfalls Hydro Company Inc. Hilltopper Wind Holdings LLC Wilmington USA 3,000.00 USD Electricity generation from renewable resources Line-by-line Enel North America Inc. 100.00% 100.00% Wilmington USA 1,000.00 USD Renewable energy Line-by-line Enel Kansas LLC 100.00% 100.00% Hispano Generación de Energía Solar SL Jerez de los Caballeros Spain 3,500.00 EUR Hope Creek LLC Crestview USA Hope Ridge Wind Project LLC Andover USA - 1.00 USD USD Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Enel Green Power España SL 51.00% 35.75% Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% Electricity generation and sale from renewable resources Line-by-line Hubject GmbH Berlin Germany 65,943.00 EUR E-mobility - Tradewind Energy Inc. Enel X International Srl 100.00% 100.00% 12.50% 12.50% 393 AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Hydro Development Group Acquisition LLC Wilmington USA 1.00 USD 5,000.00 USD Electricity generation from renewable resources Electricity generation from renewable resources Equity AFS EGPNA REP Hydro Holdings LLC 100.00% 50.00% Enel North America Inc. 100.00% 100.00% 22,520,000.00 EUR Hydro-electric activities Equity Enel SpA 1.00% 1.00% Hydro Energies Corporation Willison Idrosicilia SpA Milan I-EM SAT Ltd Didcot, Oxfordshire USA Italy United Kingdom 100.00 GBP ICT Equity I-EM Srl 100.00% 30.00% I-EM Srl Turin Italy 28,571.43 EUR Design and development Equity Enel X Srl 30.00% 30.00% Ifx Networks Argentina Srl Ifx Networks Chile SA Ifx Networks Colombia SAS Buenos Aires Argentina 2,260,551.00 ARS Santiago Chile 5,761,374,444.00 CLP Bogotá Colombia 15,734,959,000.00 COP Ifx Networks LLC Wilmington USA 80,848,653.00 Ifx Networks Ltd Tortola Virgin Islands 100,000.00 Ifx Networks Panama SA Ifx/eni - Spc III Inc. Ifx/eni - Spc IV Inc. Ifx/eni - Spc Panama Inc. Panama City Panama 21,000.00 Tortola Tortola Virgin Islands 50,000.00 Virgin Islands 50,000.00 Tortola Virgin Islands 50,000.00 Ifx/eni - Spc V Inc. Tortola Virgin Islands 50,000.00 USD USD USD USD USD USD USD - - - - - - - - - - Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Ifx/eni - Spc V Inc. Minority Stock Holding Corp. Ifx/eni - Spc IV Inc. Servicios de Internet Eni Chile Ltda Ifx Networks Panama SA Ifx/eni - Spc III Inc. 99.85% 0.15% 41.00% 59.00% 58.33% 41.67% 20.60% 20.60% 20.60% Ufinet Latam SLU 100.00% 20.60% Ifx Networks LLC 100.00% 20.60% Ifx/eni - Spc Panama Inc. 100.00% 20.60% Ifx Networks Ltd 100.00% 20.60% Ifx Networks Ltd 100.00% 20.60% Ifx Networks Ltd 100.00% 20.60% Ifx Networks Ltd 100.00% 20.60% Edistribución Redes Digitales SL (Sociedad Unipersonal) 14.29% 10.01% Bilbao Spain 84,141.68 EUR Information on infrastructure of Inkolan associates Inkolan Información y Coordinación de obras AIE International Endesa BV International Multimedia University Srl (in bankrupticy) Inversora Codensa SAS Inversora Dock Sud SA Isamu Ikeda Energia SA Amsterdam Netherlands 15,428,520.00 EUR Holding Line-by-line Endesa SA 100.00% 70.10% Rome Italy 24,000.00 EUR Training - Enel Italia SpA 13.04% 13.04% Bogotá Colombia 5,000,000.00 COP Electricity transmission and distribution Line-by-line Codensa SA ESP 100.00% 27.66% Buenos Aires Argentina 828,941,660.00 ARS Holding Line-by-line Enel Américas SA 57.14% 32.72% Niterói Brazil 45,474,475.77 BRL Electricity generation and sale Line-by-line Italgest Energy (Pty) Ltd Gauteng Republic of South Africa 1,000.00 ZAR Jack River LLC Minneapolis USA Jessica Mills LLC Minneapolis USA - - USD USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Juicenet GmbH Berlin Germany 25,000.00 EUR Renewables Line-by-line Juicenet Ltd London United Kingdom 1.00 GBP - Line-by-line Julia Hills LLC Minneapolis USA - USD Electricity generation from renewable resources Line-by-line 394 Enel Green Power Brasil Participações Ltda Enel Green Power RSA (Pty) Ltd 100.00% 100.00% 100.00% 100.00% Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% Chi Minnesota Wind LLC Enel X International Srl Enel X International Srl Chi Minnesota Wind LLC 51.00% 51.00% 100.00% 100.00% 100.00% 100.00% 51.00% 51.00% Consolidated Annual Report 2019Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Kirklarelí Eolíko Enerjí Elektrík Üretím Ve Tícaret Anoním Şírketí Istanbul Turkey 9,000,000.00 TRY Kelley’s Falls LLC Wilmington USA - USD Wilmington USA 100.00 USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line AFS Line-by-line Kings River Hydro Company Inc Kingston Energy Storage LLC Kinneytown Hydro Company Inc. Kino Contractor SA de Cv Kino Facilities Manager SA de Cv Kirklareli̇ Eolíko Enerjí Elektrík Üretím Ve Tícaret Anoním Şírketí Kongul Enerjí Sanayí Ve Tícaret Anoním Şírketí Korea Line Corporation Wilmington USA - USD Renewables Line-by-line Wilmington USA 100.00 USD Mexico City Mexico 100.00 MXN Mexico City Mexico 100.00 MXN Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Istanbul Turkey 5,250,000.00 TRY - Line-by-line Istanbul Turkey 125,000,000.00 TRY Electricity generation from renewable resources Line-by-line Seoul South Korea 122,132,520,000.00 KRW Shipping - Kromschroeder SA Barcelona Spain 627,126.00 EUR Services Equity LaChute Hydro Company LLC Wilmington USA Lake Emily Solar LLC Wilmington USA Lake Pulaski Solar LLC Land Run Wind Project LLC Lawrence Creek Solar LLC Liberty Energy Storage LLC Lindahl Wind Holdings LLC Wilmington USA Dover Minneapolis USA USA Andover USA Wilmington USA Lindahl Wind Project LLC Wilmington USA - - - USD USD USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Equity Line-by-line 100.00 USD Renewables Line-by-line USD - Line-by-line Line-by-line USD USD USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources - - - - Enel Green Power Turkey Enerjí Yatirimlari Anoním Şírketí Enel North America Inc. Enel North America Inc. Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) Enel North America Inc. Enel Green Power México S de RL de Cv Hidroelectricidad del Pacífico S de RL de Cv Enel Green Power México S de RL de Cv Hidroelectricidad del Pacífico S de Rl de Cv Enel Green Power Turkey Enerjí Yatirimlari Anoním Şírketí Enel Green Power Turkey Enerjí Yatirimlari Anoním Şírketí Enel Global Trading SpA Endesa Medios y Sistemas SL (Sociedad Unipersonal) EGPNA REP Hydro Holdings LLC 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 99.00% 100.00% 1.00% 99.00% 100.00% 1.00% 100.00% 100.00% 100.00% 100.00% 0.25% 0.25% 29.26% 20.51% 100.00% 50.00% Aurora Distributed Solar LLC Sundance Wind Project LLC Aurora Distributed Solar LLC Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) 100.00% 51.00% 100.00% 100.00% 100.00% 51.00% 100.00% 100.00% Line-by-line Aurora Distributed Solar LLC 100.00% 51.00% Line-by-line EGPNA Preferred Wind Holdings LLC 100.00% 100.00% Line-by-line Lindahl Wind Holdings LLC 100.00% 100.00% 395 AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Little Elk Wind Holdings LLC Little Elk Wind Project LLC Littleville Power Company Inc. Wilmington USA Oklahoma City USA - - USD USD Boston USA 100.00 USD Litus Energy Storage LLC Andover USA - USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Livister Guatemala SA Guatemala City Guatemala 1,299,900.00 GTQ - Livister Honduras SA Tegucigalpa Honduras 2,500,000.00 HNL Holding Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Little Elk Wind Holdings LLC 100.00% 100.00% AFS Line-by-line Equity Equity Enel North America Inc. Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) 100.00% 100.00% 100.00% 100.00% Ufinet Guatemala SA Ufinet Latam SLU 2.00% 98.00% 20.60% Livister Guatemala SA Livister Latam SLU 0.40% 99.60% 20.60% Livister Latam SLU Madrid Spain 3,000.00 EUR - Equity Ufinet Latam SLU 100.00% 20.60% Llano Sánchez Solar Power One Srl Panama City Panama 10,020.00 USD Electricity generation from renewable resources Line-by-line Lone Pine Wind Inc. Calgary Canada Lone Pine Wind Project LP Lower Saranac Hydro Partners LLC Lower Saranac Hydro LLC Calgary Canada Wilmington USA Wilmington USA Lower Valley LLC Wilmington USA Lowline Rapids LLC Wilmington USA - - - - - - Enel Green Power Panamá Srl Energía y Servicios South America SpA Enel Green Power Canada Inc. Enel Green Power Canada Inc. EGPNA REP Hydro Holdings LLC 99.80% 0.20% 100.00% 10.00% 10.00% 10.00% 10.00% 100.00% 50.00% Line-by-line Enel North America Inc. 100.00% 100.00% Line-by-line Enel North America Inc. 100.00% 100.00% Equity EGPNA REP Hydro Holdings LLC 100.00% 50.00% CAD Renewable energy - CAD Renewables Line-by-line Equity USD USD USD USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Luz Andes Ltda Santiago Chile 1,224,348.00 CLP Electricity and fuel transmission, distribution and sale Line-by-line Enel Distribución Chile SA 100.00% 61.36% Lybian Italian Joint Company - Azienda Libico-Italiana (A.L.I) Tripoli Libya 1,350,000.00 EUR Electricity generation - Enelpower SpA 0.33% 0.33% Maicor Wind Srl Rome Italy 20,850,000.00 EUR Electricity generation from renewable resources Line-by-line Enel Green Power SpA 100.00% 100.00% Malaspina Energy Scarl in liquidation Bergamo Marengo Solar LLC Wilmington Marte Srl Rome Italy USA Italy 100,000.00 EUR Electricity sale Line-by-line YouSave SpA 100.00% 100.00% 1.00 USD Photovoltaic Line-by-line Enel Kansas LLC 100.00% 100.00% 6,100,000.00 EUR Electricity generation from renewable resources Line-by-line Marudhar Wind Energy Private Limited Gurugram India 100,000.00 INR Electricity transmission, distribution and sale Line-by-line Más Energía S de RL de Cv Mexico City Mexico 61,872,926.00 MXN Electricity generation from renewable resources Line-by-line 396 Enel Green Power SpA Enel Green Power India Private Limited (formerly BLP Energy Private Limited) Enel Green Power México S de RL de Cv Hidroelectricidad del Pacífico S de RL de Cv 100.00% 100.00% 100.00% 100.00% 99.99% 0.01% 100.00% Consolidated Annual Report 2019 Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Mason Mountain Wind Project LLC Wilmington USA - USD Matrigenix (Pty) Ltd Gauteng Republic of South Africa 1,000.00 ZAR Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Padoma Wind Power LLC 100.00% 100.00% Line-by-line Enel Green Power RSA (Pty) Ltd 100.00% 100.00% Wilmington USA 1.00 USD - Line-by-line Enel Kansas LLC 100.00% 100.00% Burgos Spain 60,100.00 EUR Environmental studies Equity Nuclenor SA 50.00% 17.53% Andover USA Metro Wind LLC Minneapolis USA 1.00 - USD USD Mexicana de Hidroelectricidad Mexhidro S de RL de Cv Mexico City Mexico 181,728,901.00 MXN Electricity generation and sale from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% Line-by-line Enel Green Power México S de RL de Cv 99.99% 99.99% Mibgas SA Madrid Spain 3,000,000.00 EUR Gas market operator - Endesa SA 1.35% 0.95% Casablanca Morocco 145,000,000.00 MAD Plant development, design, construction and operation Equity Nareva Enel Green Power Morocco SA 70.00% 35.00% Wilmington USA - USD Line-by-line Enel North America Inc. 100.00% 100.00% Minicentrales Acequia Cinco Villas AIE Ejea de los Caballeros Spain 3,346,993.04 EUR Zaragoza Spain 1,202,000.00 EUR Hydro-electric plants Zaragoza Spain 1,820,000.00 EUR Hydro-electric plants Equity Electricity generation from renewable resources Electricity generation from renewable resources - - Enel Green Power España SL Enel Green Power España SL Enel Green Power España SL 5.39% 3.78% 15.00% 10.52% 36.50% 25.59% McBride Wind Project LLC Medidas Ambientales SL Merit Wind Project LLC Midelt Wind Farm SA Mill Shoals Hydro Company LLC Minicentrales del Canal de las Bárdenas AIE Minicentrales del Canal Imperial-Gallur SL Minority Stock Holding Corp. Tortola Virgin Islands 50,000.00 USD - Equity Ifx Networks Ltd 100.00% 20.60% Mira Energy (Pty) Ltd Johannesburg Republic of South Africa 100.00 ZAR Electricity generation from renewable resources Line-by-line Enel Green Power RSA (Pty) Ltd 100.00% 100.00% Miranda Plataforma Logística SA Burgos Spain 1,800,000.00 EUR Regional development - Nuclenor SA 0.22% 0.08% Missisquoi LLC Wilmington USA Montrose Solar LLC Wilmington USA - - Mountrail Wind Project LLC Andover USA 1.00 USD USD USD MSN Solar Tres SpA Santiago Chile 1,000,000.00 CLP Mucho Viento Wind Project LLC Andover USA Muskegon County Solar Project LLC Muskegon Green Wind Project LLC Andover USA Andover USA Mustang Run Wind Project LLC Andover USA 1.00 1.00 1.00 1.00 USD USD USD USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation and sale from renewable resources Plant construction - Electricity generation from renewable resources Electricity generation and sale from renewable resources Electricity generation and sale from renewable resources Electricity generation and sale from renewable resources Electricity generation and sale from renewable resources Equity EGPNA REP Hydro Holdings LLC 100.00% 50.00% Line-by-line Aurora Distributed Solar LLC 100.00% 51.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Green Power Chile Ltda 100.00% 61.93% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% 397 AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Napolean Wind Project LLC Nareva Enel Green Power Morocco SA Andover USA 1.00 USD Electricity generation and sale from renewable resources Line-by-line Casablanca Morocco 98,750,000.00 MAD Holding. Electricity sale Equity Navalvillar Solar SL Madrid Spain 3,000.00 EUR Photovoltaic Line-by-line Netell Telecomunicações SA Nevkan Renewables LLC Newbury Hydro Company LLC Ngonye Power Company Limited Barueri Brazil 29,800,000.00 BRL Telecommunications - Wilmington USA Andover USA - - USD USD Electricity generation from renewable resources Electricity generation from renewable resources AFS Lusaka Zambia 10.00 ZMW Electricity sale Line-by-line Nojoli Wind Farm (RF) (Pty) Ltd Gauteng Republic of South Africa 10,000,000.00 ZAR North Canal Waterworks Boston USA North English Wind Project LLC Andover USA Andover USA Andover USA Andover USA Wilmington USA North Rock Wind LLC Northland Wind Project LLC Northstar Wind Project LLC Northwest Hydro LLC Notch Butte Hydro Company Inc. - 1.00 1.00 1.00 - - USD USD USD USD USD USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation and sale from renewable resources Electricity generation and sale from renewable resources Electricity generation and sale from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Tradewind Energy Inc. Enel Green Power Morocco SARLAU Enel Green Power España SL Ufinet Brasil Administração Ltda 100.00% 100.00% 50.00% 50.00% 100.00% 70.10% 60.00% 12.36% Line-by-line Enel Nevkan Inc. 100.00% 100.00% Enel North America Inc. Enel Green Power Solar Ngonye SpA (formerly Enel Green Power Africa Srl) 100.00% 100.00% 80.00% 80.00% Line-by-line Enel Green Power RSA (Pty) Ltd 60.00% 60.00% Line-by-line Enel North America Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Chi West LLC 100.00% 100.00% Enel North America Inc. Endesa Generación SA 100.00% 100.00% 50.00% 35.05% Wilmington USA 100.00 USD Line-by-line Nuclenor SA Burgos Spain 102,000,000.00 EUR Nuclear plants Equity Nuove Energie Srl Porto Empedocle Italy 5,204,028.73 EUR Construction and management of LNG regasification infrastructure Line-by-line Enel Global Trading SpA 100.00% 100.00% Nuxer Trading SA Montevideo Uruguay 80,000.00 UYU Electricity trading Line-by-line Enel Brasil SA 100.00% 57.26% Gauteng Republic of South Africa 1,000.00 ZAR Electricity generation and sale from renewable resources Line-by-line Enel Green Power RSA 2 (RF) (Pty) Ltd 51.00% 51.00% Wilmington USA 1.00 USD Holding Line-by-line Ochrana A Bezpecnost Se SRO Kalná Nad Hronom Slovakia 33,193.92 EUR Security services Equity Valencia Spain 3,000.00 EUR Photovoltaic Line-by-line Enel X North America Inc. Slovenské elektrárne AS Enel Green Power España SL 100.00% 100.00% 100.00% 33.00% 100.00% 70.10% Nxuba Wind Farm (RF) (Pty) Ltd Nyc Storage (353 Chester) Spe LLC Olivum Pv Farm 01 SLU Omip - Operador do Mercado Ibérico (Portugal) Sgps SA Electricity market operator Installation, maintenance and repair of electronic plant - Endesa SA 5.00% 3.51% Equity Enel SpA 50.00% 50.00% Lisbon Portugal 2,610,000.00 EUR OpEn Fiber SpA Milan Italy 250,000,000.00 EUR 398 Consolidated Annual Report 2019Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Andover USA 1.00 USD Electricity generation and sale from renewable resources Line-by-line Tradewind Energy Inc. 100.00% 100.00% Madrid Spain 1,999,998.00 EUR Wilmington USA Origin Wind Energy LLC Wilmington USA - - USD USD Osage Wind Holdings LLC Wilmington USA 100.00 USD Osage Wind LLC Wilmington USA - USD Electricity market operator Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources - Endesa SA 5.00% 3.51% Equity Equity EGPNA Wind Holdings 1 LLC Origin Goodwell Holdings LLC 100.00% 20.00% 100.00% 20.00% Line-by-line Enel Kansas LLC 50.00% 50.00% Line-by-line Osage Wind Holdings LLC 100.00% 50.00% Enel North America Inc. Enel Green Power Turkey Enerjí Yatirimlari Anoním Şírketí Enel Green Power España SL 100.00% 100.00% 100.00% 100.00% 33.33% 23.36% Wilmington USA 100.00 USD AFS Istanbul Turkey 11,250,000.00 TRY - Line-by-line Oxagesa AIE Alcaniz Spain 6,010.00 Oyster Bay Wind Farm (RF) (Pty) Ltd Gauteng Republic of South Africa 1,000.00 Padoma Wind Power LLC Elida USA Dallas USA - - EUR ZAR USD USD Cogeneration of electricity and heat Equity Electricity generation and sale from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Enel Green Power RSA 2 (RF) (Pty) Ltd 60.00% 60.00% Line-by-line Enel North America Inc. 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Valencia Spain 3,000.00 EUR Photovoltaic systems Line-by-line Andover USA 1.00 USD Electricity generation and sale from renewable resources Line-by-line Enel Green Power España SL Tradewind Energy Inc. 100.00% 70.10% 100.00% 100.00% Paravento SL Lugo Spain 3,006.00 EUR Line-by-line Enel Green Power España SL 90.00% 63.09% Madrid Spain 1,183,100.00 EUR Madrid Spain 1,313,100.00 EUR Mexico City Mexico 100.00 MXN Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Equity Equity Line-by-line Mexico City Mexico 100.00 MXN Mexico City Mexico 100.00 MXN Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Open Range Wind Project LLC Operador del Mercado Ibérico de Energía - Polo Español SA Origin Goodwell Holdings LLC Ottauquechee Hydro Company Inc. Ovacik Eolíko Enerjí Elektrík Üretím Ve Tícaret Anoním Şírketí Palo Alto Farms Wind Project LLC Pampinus Pv Farm 01 SLU Paradise Creek Wind Project LLC Parc Eòlic La Tossa-La Mola d’en Pascual SL Parc Eòlic Los Aligars SL Parque Amistad II SA de Cv Parque Amistad III SA de Cv Parque Amistad IV SA de Cv Enel Green Power España SL 30.00% 21.03% Enel Green Power España SL Enel Rinnovabile SA de Cv Hidroelectricidad del Pacífico S de RL de Cv Enel Rinnovabile SA de Cv Hidroelectricidad del Pacífico S de RL de Cv Enel Rinnovabile SA de Cv Hidroelectricidad del Pacífico S de RL de Cv 30.00% 21.03% 99.00% 1.00% 99.00% 1.00% 99.00% 1.00% 100.00% 100.00% 100.00% 399 AttachmentsMadrid Spain 6,540,000.00 EUR Cogeneration of electricity and heat Line-by-line Enel Green Power España SL 75.50% 52.93% Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Line-by-line Enel Green Power España SL 100.00% 70.10% Parque Eólico A Capelada SL (Sociedad Unipersonal) Parque Eólico BR-1 SAPI de Cv La Coruña Spain 5,857,704.33 EUR Mexico City Mexico - MXN Parque Eólico Carretera de Arinaga SA Las Palmas de Gran Canaria Spain 1,603,000.00 EUR La Coruña Spain 3,606,072.60 EUR Madrid Spain 120,400.00 EUR La Coruña Spain 552,920.00 EUR Parque Eólico de Santa Lucía SA Las Palmas de Gran Canaria Parque Eólico Finca de Mogán SA Santa Cruz de Tenerife Spain 901,500.00 EUR Spain 3,810,340.00 EUR Electricity generation from renewable resources Plant construction - Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Line-by-line Line-by-line Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Cogeneration of electricity and heat Line-by-line Madrid Spain 3,006.00 EUR Wind plants Line-by-line Madrid Spain 3,006.00 EUR Wind plants Line-by-line Salvador Brazil 4,096,626.00 BRL Electricity generation and sale from renewable resources Line-by-line Buenos Aires Argentina 6,500,000.00 ARS Line-by-line Madrid Spain 7,193,970.00 EUR Santiago Chile 20,878,010,000.00 CLP Santiago Chile 566,096,564.00 CLP Salvador Brazil 1,946,507.00 BRL Renewables Line-by-line Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Line-by-line Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Equity Line-by-line Salvador Brazil 6,986,993.00 BRL Mexico City Mexico 100.00 MXN Parque Solar Cauchari IV SA San Salvador de Jujuy Argentina 500,000.00 ARS 400 Parque Eólico de Barbanza SA Parque Eólico de Belmonte SA Parque Eólico de Farlan SLU Parque Eólico de San Andrés SA Parque Eólico Montes de las Navas SA Parque Eólico Muniesa SL Parque Eólico Palmas dos Ventos Ltda Parque Eólico Pampa SA Parque Eólico Sierra del Madero SA Parque Eólico Taltal SpA Parque Eólico Valle de los Vientos SpA Parque Eólico Ventos da Boa Vista Ltda Parque Eólico Zeus Ltda Parque Salitrillos SA de Cv Enel Green Power México S de RL de Cv Enel Rinnovabile SA de Cv Enel Green Power España SL Enel Green Power España SL Parque Eólico de Barbanza SA Enel Green Power España SL Enel Green Power España SL Enel Green Power España SL Enel Green Power España SL Parque Eólico de Santa Lucía SA Enel Green Power España SL 0.50% 25.50% 25.00% 80.00% 56.08% 75.00% 52.58% 50.17% 35.17% 100.00% 70.10% 82.00% 57.48% 65.67% 1.00% 46.50% 90.00% 63.09% Enel Green Power España SL Enel Green Power Brasil Participações Ltda Enel Green Power Desenvolvimento Ltda Enel Green Power Argentina SA 100.00% 70.10% 100.00% 100.00% 0.00% 100.00% 100.00% Enel Green Power España SL Enel Chile SA Enel Green Power Chile Ltda Enel Chile SA Enel Green Power Chile Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Brasil Participações Ltda Tenedora de Energía Renovable Sol y Viento SAPI de Cv Enel Green Power Argentina SA Energía y Servicios South America SpA 58.00% 40.66% 0.01% 99.99% 0.01% 99.99% 61.93% 61.93% 100.00% 100.00% 100.00% 100.00% 60.80% 20.00% 95.00% 5.00% 100.00% Parque Eólico Punta de Teno SA Santa Cruz de Tenerife Spain 528,880.00 EUR Line-by-line Enel Green Power España SL 52.00% 36.45% Consolidated Annual Report 2019Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Parque Solar Don José SA de Cv Parque Solar Fotovoltaico Sabanalarga SAS Parque Solar Fotovoltaico Valledupar SAS Parque Solar Maipú SpA Parque Solar Villanueva Tres SA de Cv Parque Talinay Oriente SA Mexico City Mexico 100.00 MXN Bogotá Colombia 231,000,000.00 COP Bogotá Colombia 227,000,000.00 COP Santiago Chile 404,212,503.00 CLP Mexico City Mexico 306,024,631.13 MXN Santiago Chile 66,092,165,170.93 CLP Parronal SpA Santiago Chile 1,000,000.00 CLP Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Equity Line-by-line Line-by-line Electricity generation and sale from renewable resources Line-by-line Electricity generation from renewable resources Electricity generation from renewable resources Equity Line-by-line Plant development, design, construction and operation Line-by-line Tenedora de Energía Renovable Sol y Viento SAPI de Cv Enel Green Power Colombia SAS ESP Enel Green Power Colombia SAS ESP Enel Green Power Chile Ltda Enel Green Power del Sur SpA Tenedora de Energía Renovable Sol y Viento SAPI de Cv Enel Green Power Chile Ltda Enel Green Power SpA Enel Green Power del Sur SpA 60.80% 20.00% 100.00% 100.00% 100.00% 100.00% 1.00% 99.00% 61.93% 60.80% 20.00% 60.91% 34.56% 72.29% 100.00% 61.93% Pastis - Centro Nazionale per la ricerca e lo sviluppo dei materiali SCPA (in liquidation) Paynesville Solar LLC Brindisi Italy 2,065,000.00 EUR R&D - Enel Italia SpA 1.14% 1.14% Minnesota USA - USD Electricity generation from renewable resources Line-by-line Aurora Distributed Solar LLC 100.00% 51.00% PayTipper Network Srl Cascina PayTipper SpA Milan Italy Italy 40,000.00 EUR Services Line-by-line PayTipper SpA 100.00% 55.00% 3,000,000.00 EUR Services Line-by-line Enel X Srl 55.00% 55.00% Ashkelon Israel - ILS R&D - Pego Portugal 50,000.00 EUR Electricity sale Equity PDP Technologies Ltd Pegop - Energia Eléctrica SA Pelzer Hydro Company LLC Wilmington USA - USD PH Chucás SA San José Costa Rica 100,000.00 CRC PH Don Pedro SA San José Costa Rica 100,001.00 CRC PH Guácimo SA San José Costa Rica 50,000.00 CRC PH Río Volcán SA San José Costa Rica 100,001.00 CRC Pincher Creek LP Alberta Canada CAD Renewables Line-by-line Pine Island Distributed Solar LLC Planta Eólica Europea SA Wilmington USA USD Line-by-line Seville Spain 1,198,532.32 EUR - - Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Equity Line-by-line Line-by-line Line-by-line Electricity generation from renewable resources Electricity generation from renewable resources Enel Global Infrastructure and Networks Srl Endesa Generación Portugal SA Endesa Generación SA EGPNA REP Hydro Holdings LLC Enel Green Power Costa Rica SA Energía y Servicios South America SpA Enel Green Power Costa Rica SA 4.75% 4.75% 0.02% 49.98% 35.05% 100.00% 50.00% 40.31% 24.69% 65.00% 33.44% 33.44% Enel Green Power Costa Rica SA Enel Alberta Wind Inc. Enel Green Power Canada Inc. Aurora Distributed Solar LLC 34.32% 34.32% 99.00% 1.00% 100.00% 100.00% 51.00% Line-by-line Enel Green Power Costa Rica SA 65.00% 65.00% Line-by-line Enel Green Power España SL 56.12% 39.34% 401 AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Pomerado Energy Storage LLC PowerCrop Macchiareddu Srl Wilmington USA 1.00 USD Bologna Italy 100,000.00 EUR PowerCrop Russi Srl Bologna Italy 100,000.00 EUR Bologna Italy 4,000,000.00 EUR Minneapolis USA Prairie Rose Wind LLC New York USA - - USD USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Equity Equity Equity Equity Equity Niterói Brazil 36,965,444.64 BRL Electricity generation and sale Line-by-line Barcelona Spain 60,101.22 EUR Hydroelectric plants Equity Lérida Spain 8,400,000.00 EUR Electricity generation and distribution - Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) PowerCrop SpA (formerly PowerCrop Srl) PowerCrop SpA (formerly PowerCrop Srl) Enel Green Power SpA 100.00% 100.00% 100.00% 50.00% 100.00% 50.00% 50.00% 50.00% Prairie Rose Wind LLC 100.00% 20.00% EGPNA REP Wind Holdings LLC Enel Green Power Brasil Participações Ltda Enel Green Power España SL 100.00% 20.00% 100.00% 100.00% 30.00% 21.03% Endesa SA 8.43% 5.91% Madrid Spain 12,020.00 EUR Mexico City Mexico 89,708,835.00 MXN Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Enel Green Power España SL 100.00% 70.10% Line-by-line Enel Green Power México S de RL de Cv 99.99% 99.99% Madrid Spain 601,000.00 EUR Alicante Spain 27,000.00 EUR Desalinization and water supply Equity Electricity generation from renewable resources Equity San Miguel Peru 1,000.00 SOL Electricity generation Line-by-line Jakarta Indonesia 10,001,500.00 USD Line-by-line Pulida Energy (RF) (Pty) Ltd Gauteng Republic of South Africa 10,000,000.00 ZAR Pyrites Hydro LLC Albany USA - USD Line-by-line Enel Green Power RSA (Pty) Ltd 52.70% 52.70% Quatiara Energia SA Niterói Brazil 13,766,118.96 BRL Electricity sale Line-by-line Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Equity Endesa SA 45.00% 31.55% Enel Green Power España SL 33.33% 23.37% Enel Green Power Partecipazioni Speciali Srl Energía y Servicios South America SpA Enel Green Power SpA 99.90% 100.00% 0.10% 90.00% 90.00% EGPNA REP Hydro Holdings LLC Enel Green Power Brasil Participações Ltda Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) Tradewind Energy Inc. 100.00% 50.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Andover USA - USD Electricity generation from renewable resources Line-by-line Andover USA Andover USA 1.00 - USD USD Electricity generation and sale from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Tradewind Energy Inc. 100.00% 100.00% PowerCrop SpA (formerly PowerCrop Srl) Prairie Rose Transmission LLC Primavera Energia SA Productora de Energías SA Productora Eléctrica Urgelense SA Promociones Energéticas del Bierzo SL Proveedora de Electricidad de Occidente S de RL de Cv Proyecto Almería Mediterráneo SA Proyectos Universitarios de Energías Renovables SL Proyectos y Soluciones Renovables SAC PT Enel Green Power Optima Way Ratai Queens Energy Storage LLC Ranchland Solar Project LLC Ranchland Wind Project LLC 402 Consolidated Annual Report 2019Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Rattlesnake Creek Holdings LLC Rausch Creek Wind Project LLC Delaware USA Andover USA 1.00 1.00 USD - Line-by-line Enel Kansas LLC 100.00% 100.00% USD Electricity generation and sale from renewable resources Line-by-line Tradewind Energy Inc. 100.00% 100.00% Reaktortest Sro Trnava Slovakia 66,389.00 EUR R&D Equity Slovenské elektrárne AS 49.00% 16.17% Red Centroamericana de Telecomunicaciones SA Red Dirt Wind Holdings I LLC Red Dirt Wind Holdings LLC Red Dirt Wind Project LLC Red Fox Wind Project LLC Redes y Telecomunicaciones S de RL de Cv Reftinskaya GRES LLC Panama City Panama 2,700,000.00 USD Telecommunications - Enel SpA 11.11% 11.11% Dover Wilmington Dover USA USA USA Wilmington USA 100.00 USD Holding Line-by-line Enel North America Inc. 100.00% 100.00% - 1.00 1.00 USD Renewables Line-by-line Enel Kansas LLC 100.00% 100.00% USD Electricity generation from renewable resources Line-by-line Red Dirt Wind Holdings LLC 100.00% 100.00% USD - Line-by-line Enel Kansas LLC 100.00% 100.00% San Pedro Sula Honduras 82,370,000.00 HNL Telecommunications Livister Honduras SA 80.00% 16.48% Pgt Reftinskii Russian Federation 10,000.00 RUB Line-by-line Enel Russia PJSC 100.00% 56.43% Electricity generation and sale Electricity generation from renewable resources Renovables de Guatemala SA Guatemala City Guatemala 1,924,465,600.00 GTQ Line-by-line Renovables La Pedrera SLU Renovables Mediavilla SLU Riverbend Farms Wind Project LLC Zaragoza Zaragoza Spain Spain 3,000.00 EUR Photovoltaic systems Line-by-line 3,000.00 EUR Photovoltaic systems Line-by-line Andover USA 1.00 USD Electricity generation and sale from renewable resources Line-by-line Enel Green Power Guatemala SA Enel Green Power SpA Enel Green Power España SL Enel Green Power España SL Tradewind Energy Inc. Enel Alberta Wind Inc. Enel Green Power Canada Inc. 0.01% 99.99% 100.00% 100.00% 70.10% 100.00% 70.10% 100.00% 100.00% 99.00% 1.00% 100.00% Riverview LP Alberta Canada Roadrunner Solar Project Holdings LLC Andover USA - - Roadrunner Solar Project LLC Andover USA 100.00 USD CAD Renewables Line-by-line USD Plant construction - Electricity generation from renewable resources Electricity generation and sale from renewable resources Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Roadrunner Solar Project Holdings LLC 100.00% 100.00% Rochelle Solar LLC Coral Springs USA Rock Creek Hydro LLC Rock Creek Wind Holdings I LLC Rock Creek Wind Holdings II LLC Rock Creek Wind Holdings LLC Rock Creek Wind Project LLC Rockhaven Wind Project LLC Rocky Caney Holdings LLC Wilmington USA Dover Dover USA USA Wilmington USA Clayton USA Andover USA Oklahoma City USA 1.00 - 100.00 100.00 - 1.00 1.00 1.00 USD Photovoltaic Line-by-line Enel Kansas LLC 100.00% 100.00% USD Electricity generation from renewable resources Line-by-line USD Holding Line-by-line USD Holding Line-by-line USD Electricity generation from renewable resources Line-by-line USD Holding Line-by-line USD Electricity generation and sale from renewable resources Line-by-line Enel North America Inc. Enel North America Inc. Rock Creek Wind Holdings LLC EGPNA Preferred Holdings II LLC Rock Creek Wind Holdings LLC Tradewind Energy Inc. 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% USD Renewables Equity Enel Kansas LLC 20.00% 20.00% 403 AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Rocky Caney Wind LLC Rocky Ridge Wind Project LLC Albany USA Oklahoma City USA - - USD USD Electricity generation from renewable resources Electricity generation from renewable resources Equity Rodnikovskaya WPS Moscow Russian Federation 6,010,000.00 RUB Renewables Line-by-line Andover USA 1.00 USD Electricity generation and sale from renewable resources Line-by-line Rolling Farms Wind Project LLC RSL Telecom (Panamá) SA Equity Enel Kansas LLC 20.00% 20.00% Rocky Caney Wind LLC Enel Green Power Rus Limited Liability Company Tradewind Energy Inc. 100.00% 20.00% 100.00% 100.00% 100.00% 100.00% Panama City Panama 10,000.00 USD - Equity Ufinet Latam SLU 100.00% 20.60% Rusenergosbyt LLC Moscow Rusenergosbyt Siberia LLC Krasnoyarsk City Russian Federation Russian Federation Rustler Wind Project LLC Andover USA Ruthton Ridge LLC Minneapolis USA 18,000,000.00 RUB Electricity trading Equity Enel SpA 49.50% 49.50% 4,600,000.00 RUB Electricity sale Equity Rusenergosbyt LLC 50.00% 24.75% 1.00 - USD USD Electricity generation and sale from renewable resources Electricity generation from renewable resources Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% Saburoy SA Montevideo Uruguay 400,000.00 UYU - Equity Ifx Networks LLC 100.00% 20.60% Sacme SA Buenos Aires Argentina 12,000.00 ARS Wilmington USA - USD Monitoring of electricity system Equity Electricity generation from renewable resources AFS Seville Zaragoza Spain Spain 462,185.98 EUR Hydroelectric plants Equity 60,000.00 EUR Renewable energy Line-by-line Empresa Distribuidora Sur SA - Edesur Enel North America Inc. Enel Green Power España SL Enel Green Power España SL 50.00% 20.65% 100.00% 100.00% 50.00% 35.05% 66.67% 46.73% Wilmington USA - USD Electricity generation from renewable resources Line-by-line Padoma Wind Power LLC 100.00% 100.00% Nevinnomyssk Russian Federation 10,571,300.00 RUB Cogeneration of electricity and heat Line-by-line Enel Russia PJSC 100.00% 56.43% Seville Spain 207,340.00 EUR Services Equity Dover USA 100.00 USD Renewable energy Line-by-line Enel Green Power España SL Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) 45.00% 31.55% 100.00% 100.00% Slovenské elektrárne AS 100.00% 33.00% Se Služby Inžinierskych Stavieb SRO Kalná Nad Hronom Slovakia 200,000.00 EUR Services Equity Madrid Spain 3,010.00 EUR Electricity generation from renewable resources Line-by-line Enel Green Power España SL 100.00% 70.10% Mexico City Mexico 3,000.00 MXN Electricity generation from renewable resources Line-by-line Santiago Chile 2,768,688,228.00 CLP - Equity Enel Green Power Guatemala SA Energía Nueva Energía Limpia México S de RL de Cv Ifx Networks Ltd Ifx/eni - Spc IV Inc. 0.01% 99.99% 0.01% 99.90% 100.00% 20.60% Rome Bergamo Italy Italy 10,000,000.00 EUR Electricity sale Line-by-line Enel SpA 100.00% 100.00% 100,000.00 EUR Electricity sale Equity YouSave SpA 27.50% 27.50% Seguidores Solares Planta 2 SL (Sociedad Unipersonal) Servicio de Operación y Mantenimiento para Energías Renovables S de RL de Cv Servicios de Internet Eni Chile Ltda Servizio Elettrico Nazionale SpA Setyl Srl 404 Salmon Falls Hydro LLC Salto de San Rafael SL San Francisco de Borja SA San Juan Mesa Wind Project II LLC Sanatorium- preventorium Energetik LLC Santo Rostro Cogeneración SA Saugus River Energy Storage LLC Consolidated Annual Report 2019Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Seven Cowboy Wind Project LLC Shiawassee Wind Project LLC Andover USA Wilmington USA Shield Energy Storage Project LLC Wilmington USA Sierra Energy Storage LLC Camden USA 1.00 1.00 - - USD Electricity generation and sale from renewable resources Line-by-line Tradewind Energy Inc. 100.00% 100.00% USD - Line-by-line Enel Kansas LLC 100.00% 100.00% USD USD Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Analysis, design and research in thermal technology Equity Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) Enel Innovation Hubs Srl Enel Green Power España SL Enel Green Power España SL 100.00% 100.00% 51.00% 51.00% 41.55% 41.55% 16.70% 11.71% 28.13% 19.72% Piacenza Italy 697,820.00 EUR Granada Spain 44,900.00 EUR Electricity generation Equity Madrid Spain 175,200.00 EUR Electricity generation Equity Zaragoza Spain 61,000.00 EUR Electricity generation and sale from renewable resources Line-by-line Enel Green Power España SL 100.00% 70.10% Zaragoza Spain 61,000.00 EUR Wind plants Line-by-line Enel Green Power España SL 100.00% 70.10% La Coruña Spain 2,007,750.00 EUR Derio Spain 3,006.00 EUR Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Enel Green Power España SL 96.00% 67.30% Line-by-line Enel Green Power España SL 100.00% 70.10% Andover USA 1.00 Los Angeles USA Wilmington USA - - USD USD USD Electricity generation and sale from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Tradewind Energy Inc. 100.00% 100.00% Equity Equity Slate Creek Hydro Company LLC 95.00% 47.50% EGPNA REP Hydro Holdings LLC 100.00% 50.00% Amsterdam Netherlands 25,010,000.00 EUR Holding Equity Enel Produzione SpA 50.00% 50.00% Bratislava Slovakia 4,505,000.00 EUR Electricity supply Equity Bratislava Slovakia 1,269,295,724.66 EUR Electricity sale Equity Moravská Ostrava Czech Republic 295,819.00 CZK Electricity supply Equity 2,184,000.00 EUR Services - Slovenské elektrárne AS 100.00% 33.00% Slovak Power Holding BV 66.00% 66.00% Slovenské elektrárne AS 100.00% 33.00% Servizio Elettrico Nazionale SpA 10.00% 10.00% - - USD Renewable energy Line-by-line Enel Kansas LLC 100.00% 100.00% USD Electricity generation from renewable resources Line-by-line Texkan Wind LLC 100.00% 100.00% 405 Smart P@Per SpA Potenza Smoky Hill Holdings II LLC Wilmington Smoky Hills Wind Farm LLC Topeka Italy USA USA SIET - Società Informazioni Esperienze Termoidrauliche SpA Sistema Eléctrico de Conexión Montes Orientales SL Sistema Eléctrico de Conexión Valcaire SL Sistemas Energéticos Alcohujate SA (Sociedad Unipersonal) Sistemas Energéticos Campoliva SA (Sociedad Unipersonal) Sistemas Energéticos Mañón Ortigueira SA Sistemas Energéticos Sierra del Carazo SL (Sociedad Unipersonal) Skyview Wind Project LLC Slate Creek Hydro Associates LP Slate Creek Hydro Company LLC Slovak Power Holding BV Slovenské elektrárne - Energetické Služby SRO Slovenské elektrárne AS Slovenské elektrárne Česká Republika SRO AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Smoky Hills Wind Project II LLC Snyder Wind Farm LLC Lenexa USA Hermleigh USA - - USD USD Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Nevkan Renewables LLC 100.00% 100.00% Line-by-line Texkan Wind LLC 100.00% 100.00% Socibe Energia SA Niterói Brazil 12,969,032.25 BRL Electricity generation and sale Line-by-line Enel Green Power Brasil Participações Ltda 100.00% 100.00% Santiago Chile 5,738,046,495.00 CLP Financial investment Line-by-line Enel Chile SA 57.50% 35.61% 999,270.48 EUR Gas market operator - Endesa SA 1.66% 1.16% Bilbao Seville Spain Spain 4,507,590.78 EUR Electricity sale Line-by-line Seville Spain 1,643,000.00 EUR Seville Spain 2,404,048.42 EUR Electricity generation from renewable resources Electricity generation from renewable resources Equity Enel Green Power España SL Enel Green Power España SL 64.75% 45.39% 50.00% 35.05% Line-by-line Enel Green Power España SL 60.00% 42.06% Cordoba Spain 86,063.20 EUR Regional development - Bogotá Colombia 89,714,600.00 COP Port construction and management Line-by-line Endesa Generación SA 1.82% 1.27% Emgesa SA ESP Inversora Codensa SAS Sociedad Portuaria Central Cartagena SA 94.94% 5.05% 0.00% 27.75% Milan Italy 37,419,179.00 EUR Energy and infrastructure engineering - Enel Produzione SpA 17.65% 17.65% Sociedad Agrícola de Cameros Ltda Sociedad Bilbao Gas Hub SA Sociedad Eólica de Andalucía SA Sociedad Eólica El Puntal SL Sociedad Eólica Los Lances SA Sociedad para el Desarrollo de Sierra Morena Cordobesa SA Sociedad Portuaria Central Cartagena SA Società di sviluppo, realizzazione e gestione del gasdotto Algeria- Italia via Sardegna SpA (Galsi SpA) Società Elettrica Trigno Srl Trivento Italy 100,000.00 EUR Soetwater Wind Farm (RF) (Pty) Ltd Gauteng Republic of South Africa 1,000.00 ZAR Soliloquoy Ridge LLC Somersworth Hydro Company Inc. Sona Enerjí Üretím Anoním Şírketí Minneapolis USA - USD Wilmington USA 100.00 USD Istanbul Turkey 50,000.00 TRY Sotavento Galicia SA Santiago de Compostela Spain 601,000.00 EUR South Rock Wind Project LLC Southwest Transmission LLC Andover USA 1.00 Cedar Bluff USA Electricity generation from renewable resources Electricity generation and sale from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources USD USD USD Electricity generation and sale from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Enel Green Power SpA 100.00% 100.00% Line-by-line Enel Green Power RSA 2 (RF) (Pty) Ltd 60.00% 60.00% Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% AFS Enel North America Inc. 100.00% 100.00% Line-by-line Equity Enel Green Power Turkey Enerjí Yatirimlari Anoním Şírketí Enel Green Power España SL 100.00% 100.00% 36.00% 25.24% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Chi Minnesota Wind LLC 100.00% 100.00% Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% - - - USD Renewable energy Line-by-line Enel Kansas LLC 100.00% 100.00% 1.00 USD Renewable energy Line-by-line Enel Kansas LLC 100.00% 100.00% Spartan Hills LLC Minneapolis USA Stillman Valley Solar LLC Stillwater Woods Hill Holdings LLC Wilmington Wilmington USA USA 406 Consolidated Annual Report 2019Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Sun River LLC Bend Sundance Wind Project LLC Dover Tae Technologies Inc. Pauling Tauste Energía Distribuida SL Zaragoza Tecnatom SA Madrid USA USA USA Spain Spain Stipa Nayaá SA de Cv Mexico City Mexico 1,811,016,348.00 MXN Sublunary Trading (RF) (Pty) Ltd Bryanston Republic of South Africa 13,750,000.00 ZAR Cadiz Spain 12,020,240.00 EUR Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity distribution and sale Equity Barcelona Spain 2,800,000.00 EUR Electricity distribution Line-by-line Suministradora Eléctrica de Cádiz SA Suministro de Luz y Fuerza SL Summit Energy Storage Inc. Wilmington USA 1,000.00 USD Enel Green Power México S de RL de Cv Enel Green Power Partecipazioni Speciali Srl Enel Green Power RSA (Pty) Ltd Endesa Red SA (Sociedad Unipersonal) Hidroeléctrica de Catalunya SL ù55.21% 95.37% 40.16% 57.00% 57.00% 33.50% 23.48% 60.00% 42.06% Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Enel North America Inc. 75.00% 75.00% Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% - USD 100.00 USD Renewable energy Line-by-line Enel Kansas LLC 100.00% 100.00% 53,207,936.90 USD Electricity sale - Enel Produzione SpA 1.13% 1.13% Tecnoguat SA Guatemala City Guatemala 30,948,000.00 GTQ Lisbon Portugal 5,025,000.00 EUR 60,508.00 EUR Renewable energy Line-by-line 4,025,700.00 EUR Electricity sale and services Electricity generation from renewable resources Equity Line-by-line Electricity generation, transmission and distribution Equity Mexico City Mexico 2,892,643,576.00 MXN Renewable energy Equity Tejo Energia - Produção e Distribuição de Energia Eléctrica SA Tenedora de Energía Renovable Sol y Viento SAPI de Cv Enel Green Power España SL Endesa Generación SA Enel Green Power SpA 51.00% 35.75% 45.00% 31.55% 75.00% 75.00% Endesa Generación SA 43.75% 30.67% Enel Green Power SpA 32.89% 32.90% Teploprogress JSC Sredneuralsk Russian Federation 128,000,000.00 RUB Electricity sale Line-by-line Enel Russia PJSC 60.00% 33.86% Termoeléctrica José de San Martín SA Buenos Aires Argentina 500,006.00 ARS Plant construction and operation Equity Termoeléctrica Manuel Belgrano SA Buenos Aires Argentina 500,006.00 ARS Plant construction and operation Equity Termotec Energía AIE (in liquidation) La Pobla de Vallbona Spain 481,000.00 EUR Cogeneration of electricity and heat Equity Testing Stand of Ivanovskaya GRES JSC Komsomolsk Russian Federation 118,213,473.45 RUB Studies, projects and research - Central Dock Sud SA Enel Generación Costanera SA Enel Generación El Chocón SA Central Dock Sud SA Enel Generación Costanera SA Enel Generación El Chocón SA Enel Green Power España SL 1.42% 5.33% 9.73% 18.85% 1.42% 5.33% 9.73% 18.85% 45.00% 31.55% Enel Russia PJSC 1.65% 0.93% Texkan Wind LLC Andover USA - USD Electricity generation from renewable resources Line-by-line Enel Texkan Inc. 100.00% 100.00% Thunder Ranch Wind Holdings I LLC Thunder Ranch Wind Holdings LLC Dover Wilmington Thunder Ranch Wind Project LLC Dover USA USA USA TKO Power LLC Los Angeles USA 100.00 USD Holding Line-by-line Enel North America Inc. 100.00% 100.00% - 1.00 - USD Renewable energy Line-by-line Enel Kansas LLC 100.00% 100.00% USD USD Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Thunder Ranch Wind Holdings LLC 100.00% 100.00% Equity EGPNA REP Hydro Holdings LLC 100.00% 50.00% 407 AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Tobivox (RF) (Pty) Ltd Gauteng Republic of South Africa 10,000,000.00 ZAR Electricity generation from renewable resources Line-by-line Toledo PV AIE Madrid Torrepalma Energy 1 SLU Seville Spain Spain 26,887.96 EUR Photovoltaic systems Equity 3,100.00 EUR Photovoltaic systems Line-by-line Enel Green Power RSA (Pty) Ltd Enel Green Power España SL Enel Green Power España SL 60.00% 60.00% 33.33% 23.36% 100.00% 70.10% Tradewind Energy Inc. Wilmington USA 1,000.00 USD Electricity generation from renewable resources Line-by-line Enel Kansas LLC 100.00% 100.00% Transmisora de Energía Renovable SA Guatemala City Guatemala 233,561,800.00 GTQ Electricity generation from renewable resources Line-by-line Enel Green Power Guatemala SA Enel Green Power SpA Generadora Montecristo SA Enel Generación Chile SA 0.00% 100.00% 0.00% 100.00% 50.00% 28.97% Santiago Chile 4,404,446,151.00 CLP Electricity transmission and distribution Equity Buenos Aires Argentina 100,000.00 ARS Electricity generation, transmission and distribution Line-by-line Enel Argentina SA Enel CIEN SA 0.00% 100.00% 57.26% Girona Spain 72,121.45 EUR Electricity transmission Line-by-line Transmisora Eléctrica de Quillota Ltda Transportadora de Energía SA-TESA Transportes y Distribuciones Eléctricas SA Triton Power Company Andover USA Tsar Nicholas LLC Minneapolis USA TWE Franklin Solar Project LLC Andover USA - - - TWE Rot DA LLC Andover USA 1.00 Twin Falls Hydro Associates LP Twin Falls Hydro Company LLC Seattle USA Wilmington USA Twin Lake Hills LLC Minneapolis USA Twin Saranac Holdings LLC Wilmington USA - - - - Edistribución Redes Digitales SL (Sociedad Unipersonal) Enel North America Inc. Highfalls Hydro Company Inc. Chi Minnesota Wind LLC 73.33% 51.41% 2.00% 98.00% 100.00% 51.00% 51.00% Line-by-line Line-by-line Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Equity Equity Twin Falls Hydro Company LLC 99.51% 49.76% EGPNA REP Hydro Holdings LLC 100.00% 50.00% Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% Line-by-line Enel North America Inc. 100.00% 100.00% USD USD USD USD USD USD USD USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation and sale from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Tyme Srl Bergamo Italy 100,000.00 EUR Electricity sale Equity YouSave SpA 50.00% 50.00% Tynemouth Energy Storage Limited London United Kingdom 2.00 GBP Services Line-by-line Ufinet Argentina SA Buenos Aires Argentina 9,745,583.00 ARS - Equity Ufinet Brasil Administração Ltda Ufinet Brasil Participações Ltda City of Santo André, State of São Paulo City of Santo André, State of São Paulo Brazil 45,784,638.00 BRL Holding. Energy services - Brazil 45,784,638.00 BRL Holding - Enel Global Thermal Generation Srl Ufinet Latam SLU Ufinet Panama SA Ufinet Brasil Participações Ltda Ufinet Latam SLU Ufinet Guatemala SA Ufinet Latam SLU 100.00% 100.00% 99.95% 0.05% 99.99% 0.01% 0.01% 99.99% 20.60% 20.60% 20.60% Ufinet Chile SpA Santiago Chile 233,750,000.00 CLP Ufinet Colombia SA Bogotá Colombia 1,180,000,000.00 COP Ufinet Costa Rica SA San José Costa Rica 15,000.00 USD - - - Equity Ufinet Latam SLU 100.00% 20.60% Equity Ufinet Guatemala SA Ufinet Honduras SA Ufinet Latam SLU Ufinet Panama SA 0.00% 0.00% 90.00% 0.00% 18.54% Equity Ufinet Latam SLU 100.00% 20.60% 408 Consolidated Annual Report 2019Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Ufinet Ecuador Ufiec SA Ufinet El Salvador SA de Cv Quito Ecuador 1,050,800.00 San Salvador El Salvador 10,000.00 Ufinet Guatemala SA Guatemala City Guatemala 7,500,000.00 Ufinet Honduras SA Tegucigalpa Honduras 194,520.00 Ufinet Latam SLU Madrid Spain 15,906,312.31 USD USD GTQ HNL EUR Ufinet México S de RL de Cv Mexico City Mexico 10,032,150.00 MXN Ufinet Nicaragua SA Managua Nicaragua 2,800,000.00 NIO Ufinet Panama SA Panama City Republic of Panama 3,500,000.00 Ufinet Paraguay SA Asunción Paraguay 13,960,000.00 Ufinet Perú SAC Lima Ufinet US LLC Wilmington Peru USA Ukuqala Solar (Pty) Ltd Gauteng Republic of South Africa 3,104,923.00 1,000.00 1,000.00 USD USD SOL USD ZAR - - - - - - - - - - - Electricity generation from renewable resources Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Ufinet Guatemala SA Ufinet Latam SLU 0.00% 100.00% Ufinet Guatemala SA Ufinet Latam SLU Ufinet Latam SLU Ufinet Panama SA Ufinet Latam SLU Ufinet Panama SA 0.01% 99.99% 99.99% 0.01% 99.99% 0.01% 20.60% 20.60% 20.60% 20.60% Zacapa Sàrl 100.00% 20.60% Ufinet Guatemala SA Ufinet Latam SLU Ufinet Guatemala SA Ufinet Latam SLU Ufinet Panama SA 0.01% 99.99% 0.50% 99.00% 0.50% 20.60% 20.60% Ufinet Latam SLU 100.00% 20.60% Ufinet Latam SLU 75.00% 15.45% Ufinet Latam SLU Ufinet Panama SA 100.00% 0.00% 20.60% Line-by-line Ufinet Latam SLU 100.00% 20.60% Line-by-line Enel Green Power RSA (Pty) Ltd 100.00% 100.00% Unión Eléctrica de Canarias Generación SAU Las Palmas de Gran Canaria Spain 190,171,520.00 EUR Electricity sale Line-by-line Endesa Generación SA 100.00% 70.10% Upington Solar (Pty) Ltd Gauteng Republic of South Africa 1,000.00 ZAR USB4 Wind Template Andover USA - USD Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Enel Green Power RSA (Pty) Ltd 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Řež Czech Republic 524,139,000.00 CZK R&D Equity Madrid Spain 3,000.00 EUR Photovoltaic Line-by-line Slovenské elektrárne AS Enel Green Power España SL 27.77% 9.17% 100.00% 70.10% Istanbul Turkey 3,500,000.00 TRY Plant construction - Electricity generation from renewable resources AFS Enel SpA 100.00% 100.00% Niterói Brazil 7,315,000.00 BRL Electricity sale Line-by-line Ustav Jaderného Výzkumu Rez As Valdecaballero Solar SL Vektör Enerjí Üretím Anoním Şírketí Ventos de Santa Ângela Energias Renováveis SA Ventos de Santa Esperança Energias Renováveis SA Ventos de São Roque Energias Renováveis SA Vientos del Altiplano S de RL de Cv Villanueva Solar SA de Cv Niterói Brazil 4,727,414.00 BRL Maracanaú Brazil 9,988,722.00 BRL Mexico City Mexico 1,455,854,094.00 MXN Mexico City Mexico 205,316,027.15 MXN Viruleiros SL Santiago de Compostela Spain 160,000.00 EUR Walden Hydro LLC Wilmington USA Wapella Bluffs Wind Project LLC Andover USA - 1.00 USD USD Enel Green Power Brasil Participações Ltda Enel Green Power Brasil Participações Ltda Enel Green Power Brasil Participações Ltda Tenedora de Energía Renovable Sol y Viento SAPI de Cv Tenedora de Energía Renovable Sol y Viento SAPI de Cv 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 60.80% 20.00% 60.80% 20.00% Line-by-line Line-by-line Equity Equity Line-by-line Enel Green Power España SL 67.00% 46.97% Line-by-line Enel North America Inc. 100.00% 100.00% Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation and sale from renewable resources Line-by-line Tradewind Energy Inc. 100.00% 100.00% 409 AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Waseca Solar LLC Waseca USA Weber Energy Storage Project LLC Wilmington USA - - USD USD Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Wespire Inc. Boston USA 1,625,000.00 USD Energy services Equity West Faribault Solar LLC Wilmington USA West Hopkinton Hydro LLC Wilmington USA West Waconia Solar LLC Minnesota USA - - - USD USD USD Albany USA 300.00 USD Andover USA Andover USA Andover USA 1.00 1.00 - USD USD USD Andover USA 99.00 USD Western New York Wind Corporation Wharton-El Campo Solar Project LLC White Cloud Wind Project LLC Whitney Hill Wind Power LLC Whitney Hill Wind Power Holdings LLC Wild Plains Wind Project LLC Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation and sale from renewable resources Electricity generation and sale from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Andover USA 1.00 USD Electricity generation and sale from renewable resources Line-by-line Wild Run LP Alberta Canada 10.00 CAD Holding Line-by-line Wildcat Flats Wind Project LLC Willimantic Power Corporation Wind Belt Transco LLC Wind Parks Anatolis - Prinias SA Wind Parks Bolibas SA Wind Parks Distomos SA Andover USA 1.00 USD Hartford USA 100.00 USD Andover USA 1.00 USD Maroussi Greece 1,208,188.00 EUR Maroussi Greece 551,500.00 EUR Maroussi Greece 556,500.00 EUR Wind Parks Folia SA Maroussi Greece 424,000.00 EUR Maroussi Greece 389,000.00 EUR Maroussi Greece 551,500.00 EUR Wind Parks Gagari SA Wind Parks Goraki SA 410 Electricity generation and sale from renewable resources Electricity generation from renewable resources Electricity generation and sale from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Aurora Distributed Solar LLC Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) Enel X North America Inc. Aurora Distributed Solar LLC 100.00% 51.00% 100.00% 100.00% 11.21% 11.21% 100.00% 51.00% Line-by-line AFS Enel North America Inc. 100.00% 100.00% Line-by-line Aurora Distributed Solar LLC 100.00% 51.00% Line-by-line Enel North America Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Whitney Hill Wind Power Holdings LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Tradewind Energy Inc. Enel Alberta Wind Inc. Enel Green Power Canada Inc. Tradewind Energy Inc. 100.00% 100.00% 0.10% 99.90% 100.00% 100.00% 100.00% Line-by-line Line-by-line Enel North America Inc. 100.00% 100.00% Line-by-line Line-by-line Equity Equity Equity Equity Equity Tradewind Energy Inc. Enel Green Power Hellas Wind Parks South Evia SA Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA 100.00% 100.00% 100.00% 100.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% Consolidated Annual Report 2019Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Wind Parks Gourles SA Wind Parks Kafoutsi SA Wind Parks Katharas SA Wind Parks Kerasias SA Wind Parks Milias SA Wind Parks Mitikas SA Wind Parks Petalo SA Wind Parks Platanos SA Wind Parks Skoubi SA Wind Parks Spilias SA Wind Parks Strouboulas SA Wind Parks Vitalio SA Wind Parks Vourlas SA Maroussi Greece 555,000.00 EUR Maroussi Greece 551,500.00 EUR Maroussi Greece 768,648.00 EUR Maroussi Greece 935,990.00 EUR Maroussi Greece 1,024,774.00 EUR Maroussi Greece 772,639.00 EUR Maroussi Greece 575,000.00 EUR Maroussi Greece 625,467.00 EUR Maroussi Greece 472,000.00 EUR Maroussi Greece 847,490.00 EUR Maroussi Greece 576,500.00 EUR Maroussi Greece 361,000.00 EUR Maroussi Greece 554,000.00 EUR Winter’s Spawn LLC Minneapolis USA - USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Equity Equity Line-by-line Line-by-line Line-by-line Line-by-line Equity Line-by-line Equity Line-by-line Equity Equity Equity Line-by-line Wkn Basilicata Development Pe1 Srl Rome Woods Hill Solar LLC Wilmington Italy USA 10,000.00 EUR Renewable energy Line-by-line - USD Renewable energy Line-by-line Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas Wind Parks South Evia SA Enel Green Power Hellas Wind Parks South Evia SA Enel Green Power Hellas Wind Parks South Evia SA Enel Green Power Hellas Wind Parks South Evia SA Enel Green Power Hellas SA Enel Green Power Hellas Wind Parks South Evia SA Enel Green Power Hellas SA Enel Green Power Hellas Wind Parks South Evia SA Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA 30.00% 30.00% 30.00% 30.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 30.00% 30.00% 100.00% 100.00% 30.00% 30.00% 100.00% 100.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% Chi Minnesota Wind LLC Enel Green Power SpA Stillwater Woods Hill Holdings LLC 51.00% 51.00% 100.00% 100.00% 100.00% 100.00% WP Bulgaria 1 EOOD WP Bulgaria 10 EOOD WP Bulgaria 11 EOOD WP Bulgaria 12 EOOD WP Bulgaria 13 EOOD WP Bulgaria 14 EOOD WP Bulgaria 15 EOOD Sofia Bulgaria 5,000.00 BGN Sofia Bulgaria 5,000.00 BGN Sofia Bulgaria 5,000.00 BGN Sofia Bulgaria 5,000.00 BGN Sofia Bulgaria 5,000.00 BGN Sofia Bulgaria 5,000.00 BGN Sofia Bulgaria 5,000.00 BGN Plant construction, operation and maintenance Plant construction, operation and maintenance Plant construction, operation and maintenance Plant construction, operation and maintenance Plant construction, operation and maintenance Plant construction, operation and maintenance Plant construction, operation and maintenance Line-by-line Enel Green Power Bulgaria EAD 100.00% 100.00% Line-by-line Enel Green Power Bulgaria EAD 100.00% 100.00% Line-by-line Enel Green Power Bulgaria EAD 100.00% 100.00% Line-by-line Enel Green Power Bulgaria EAD 100.00% 100.00% Line-by-line Enel Green Power Bulgaria EAD 100.00% 100.00% Line-by-line Enel Green Power Bulgaria EAD 100.00% 100.00% Line-by-line Enel Green Power Bulgaria EAD 100.00% 100.00% 411 AttachmentsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding WP Bulgaria 19 EOOD WP Bulgaria 21 EOOD WP Bulgaria 26 EOOD WP Bulgaria 3 EOOD WP Bulgaria 6 EOOD WP Bulgaria 8 EOOD WP Bulgaria 9 EOOD Sofia Bulgaria 5,000.00 BGN Sofia Bulgaria 5,000.00 BGN Sofia Bulgaria 5,000.00 BGN Sofia Bulgaria 5,000.00 BGN Sofia Bulgaria 5,000.00 BGN Sofia Bulgaria 5,000.00 BGN Sofia Bulgaria 5,000.00 BGN Plant construction, operation and maintenance Plant construction, operation and maintenance Plant construction, operation and maintenance Plant construction, operation and maintenance Plant construction, operation and maintenance Plant construction, operation and maintenance Plant construction, operation and maintenance Line-by-line Enel Green Power Bulgaria EAD 100.00% 100.00% Line-by-line Enel Green Power Bulgaria EAD 100.00% 100.00% Line-by-line Enel Green Power Bulgaria EAD 100.00% 100.00% Line-by-line Enel Green Power Bulgaria EAD 100.00% 100.00% Line-by-line Enel Green Power Bulgaria EAD 100.00% 100.00% Line-by-line Enel Green Power Bulgaria EAD 100.00% 100.00% Line-by-line Enel Green Power Bulgaria EAD Enel Green Power España SL 100.00% 100.00% 100.00% 70.10% Xaloc Solar SLU Valencia Spain 3,000.00 EUR Photovoltaic systems Line-by-line Yacylec SA Buenos Aires Argentina 20,000,000.00 ARS Electricity transmission Equity Enel Américas SA 33.33% 19.09% Yedesa- cogeneración SA Almería Spain 234,394.72 EUR Cogeneration of electricity and heat Equity Enel Green Power España SL 40.00% 28.04% YouSave SpA Bergamo Italy 500,000.00 EUR Testing, inspection and certification services, engineering and consulting services Line-by-line Enel X Italia SpA 100.00% 100.00% Zacapa HoldCo Sàrl Luxembourg Luxembourg 300,000.00 Zacapa LLC Wilmington USA 1,000.00 Zacapa Sàrl Luxembourg Luxembourg 300,000.00 Zacapa Topco Sàrl Luxembourg Luxembourg 250,000.00 Zoo Solar Project LLC Andover USA - USD USD USD USD USD - - - - Equity Equity Equity Equity Electricity generation from renewable resources Line-by-line Zacapa Topco Sàrl 100.00% 20.60% Zacapa Sàrl 100.00% 20.60% Zacapa HoldCo Sàrl 100.00% 20.60% Enel X International Srl Tradewind Energy Inc. 20.60% 20.60% 100.00% 100.00% 412 Consolidated Annual Report 2019Concept design and realization HNTO - Gruppo HDRÀ Copy editing postScriptum di Paola Urbani Printing Varigrafica Alto Lazio Print run: 10 copies Published in June 2020 INSIDE PAGES Paper Fedrigoni Freelife Cento Weight 120 g/m2 Number of pages 414 COVER Paper Fedrigoni Freelife Cento Weight 300 g/m2 This publication is printed on FSC® certified 100% paper This document is an integral part of the annual financial report referred to in Article 154-ter, paragraph 1, of the Consolidated Law on Financial Intermediation (Legislative Decree 58 of February 24, 1998). Publication not for sale By Enel Communications Disclaimer This Report issued in Italian has been translated into English solely for the convenience of international readers Enel Società per azioni Registered Office 00198 Rome - Italy Viale Regina Margherita, 137 Stock Capital Euro 10,166,679,946 fully paid-in Companies Register of Rome and Tax I.D. 00811720580 R.E.A. of Rome 756032 VAT Code 00934061003 © Enel SpA 00198 Rome, Viale Regina Margherita, 137 9 1 0 2 a t a d i l o s n o c e l a u n n a a i r a i z n a n fi e n o i z a l e R enel.com

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